At 5% Yields, Investors Find It’s Worth Paying for Actively Managed Bond Funds Again
- They’re outpacing passive index funds as clients seek income
- Vagaries of timing, credit quality favor old-school management
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Bond powerhouses including Pacific Investment Management Co., BlackRock Inc. and Capital Group are dangling the prospect of 5% yields to convince investors it’s time to plow more assets into actively managed fixed-income funds. Clients are paying attention.
About $90 billion flowed into active bond funds in the first quarter, the most for any three-month period since mid-2021. With yields now at their highest in almost two decades, fund managers see a window of opportunity for investors to lock in outsize returns before the Federal Reserve fulfills its promise to cut rates. It’s also a chance for active managers to rebuild their portfolios, which had been starved by years of near-zero interest rates.