Too Heterogeneous to Handle? The Case for Careful Analysis of Nontraditional Bond Funds

As the end of the 30 year bond bull market begrudgingly gives over to the consensus-expected rate rise, investors’ persistent worries about the impacts of falling bond prices on their portfolios have provided great opportunity for asset managers to aggressively market and/or launch “nontraditional bond” funds. Unlike core or intermediate term bond funds, which typically benchmark their asset classes, duration and performance to the Barclays U.S. Aggregate Bond Index, nontraditional bond funds generally seek to limit interest rate exposure in an effort to preserve capital in the event of higher yields and tightening monetary policy.