The underperformance in active fixed-income funds suggests that investors would have been better off in a passive index-based strategy, such as the SPDR Barclays Long Treasury (NYSEArca: TLO), which tracks the widely observed Barclays Long U.S. Treasury Index. TLO has a duration of 17.4 years and a 2.68% 30-day SEC yield. TLO has dipped 1.6% year-to-date and generated an annualized average 6.1% return over the past five years. The ETF also shows a cheap 0.10% expense ratio.
Investors who are interested in greater diversification may track a bond fund with a range of debt securities, including government exposure and corporate debt. However, among the broader diversified investment-grade debt active category, only 17% of the funds in the investment style outperformed the Barclays Long Government/Credit Index for the year ended June 2015 and only 8% outperformed over the past five-years.
On the other hand, ETF investors can take a look at the Vanguard Long-Term Bond ETF (NYSEArca: BLV), which tracks the Barclays U.S. Long Government/Credit Float Adjusted Index, to exposure to a range of investment-grade government and corporate debt securities. BLV has a 14.7 year duration and a 4.08% 30-day SEC yield. BLV is down 3.1% year-to-date but generated an average annualized return of 6.1% over the past five years. The ETF also comes with a cheap 0.10% expense ratio.
For more information on the fixed-income market, visit our bond ETFs category.
Max Chen contributed to this article.