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Common Bond Benchmark No Longer Relevant For Many Funds

Several large bond investors feel that the Barclays U.S. Aggregate Index, used as a benchmark by many bond funds, is no longer an accurate measure of performance, according to a recent article from Barron’s. The index tracks investment-grade securities and is comprised of approximately 70% government and government-related debt. However, in the wake of the Federal Reserve’s bond purchases which have increased prices and lowered yield on government bonds, fund managers are investing more in corporate bonds and other assets not found in the index. As a result of the purchases of bonds outside of the index, according to the article almost 60% of taxable-bond measures outperformed the index over the past three years, which is triple the rate of equity funds besting the S&P 500.