Bond Funds Learn to Exploit Ratings System to Buy Riskier Debt

As ultra-low interest rates persist, investment-grade bond funds find a novel way to eke out higher returns.

Flags fly as pedestrians walk past the New York Stock Exchange.Photographer: John Taggart/Bloomberg
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In today’s low interest-rate world, investment-grade bond funds face an all-too-familiar trade-off: buy risky debt to improve returns or play it safe and underperform.

But some of them, it seems, have managed to have it both ways.