When it comes to fixed-income exposure, we have often advocated the use of strategic bond funds. They are flexible, moving in and out of different parts of the bond market in response to changing circumstances, and tend to have well-resourced teams. Backing such funds has been an easy way to get diversified bond exposure, provided you understand (and agree with) some of the big calls made by a given manager.
Look at the events of the past two years, however, and there is an argument that things have changed. Bond prices are much lower and yields much higher, giving investors some good prospects for both income and total returns from across the fixed-income universe. Investors might now want something much more targeted, such as a specific subsector (from high yield to government bonds) or even to lock in a juicy yield by buying bonds directly.
This begs the question: have strategic bond funds been earning their keep? They often promise a diversified one-stop shop that saves you from having to research and hold several bond funds. But with higher returns on offer, we might now ask if going more granular comes with better rewards.