Bill Gross: Bond-fund taxonomist
Bond-fund classification can be an arbitrary practice. It is also very important. And Bill Gross has some thoughts on it.
In the US, at least, mom-and-pop investors and advisers build portfolios with the categories used by Morningstar et al. This straitjacket isn’t always popular with asset managers, but these classifications have become standard because of their simplicity and popularity with financial advisers.
Since 2019, the “intermediate core” bucket has included funds that are sensitive to interest rates, and very little credit risk. “Core plus” bond funds also have significant duration risk, plus a sprinkling of credit risk. (But those funds don’t have as much credit risk as a high-yield bond fund, and even then, high-yield bond funds have more duration risk than bank-loan funds. Simple, right?)
This story originally appeared on: Financial Times - Author:Alexandra Scaggs
