How do you choose the best bond funds or bond ETFs from the bewildering array of products available?
Many investors find bonds deeply unintuitive – and the asset class’s inflation-fuelled crash in 2022 hasn’t exactly inspired them to dig deeper.
Yet a solid allocation to high-quality government bonds remains the first stop when it comes to strategically diversifying a portfolio dominated by equities.
And that remains true even after last year’s once-in-a-generation carnage, when those hoped-for diversification benefits truly failed to show up.
Interest-ing bonds
It seems like a good time to take a deep breath and a step back.
We’ve previously explained the purpose of bonds within a passive investing portfolio.
For UK investors, it boils down to investing in UK government bonds (known as gilts) and/or the government bonds of other developed markets. Such bonds are the likeliest to cushion your equities when stock markets plunge. And that’s just what we want our bonds for. (Equities can deliver the long-term returns – provided we hold on to them…)
We believe the best bond fund vehicles are ETFs and index funds. That’s because their low fees leave more return in the pockets of investors – as opposed to fat-cat fund managers. (See below for more on the ‘ongoing charge figure’, or OCF).
We’ll explain our choices below, but first let’s run through our picks for the best bond ETFs and bond index funds. We’ll do gilts first, and then global government bonds further below.
Best bond funds and ETFs – UK gilts
| Fund/ETF | Cost = OCF (%) | Index | Duration | YTM (%) | Credit quality | Domicile |
| Lyxor Core UK Government Bond ETF | 0.07 | FTSE Actuaries UK Conventional Gilts All Stocks | 8.4 | 4.7 | AA | Lux |
| iShares Core UK Gilts ETF | 0.07 | FTSE Actuaries UK Conventional Gilts All Stocks | 8.4 | 4.6 | AA | Ireland |
| iShares UK Gilts All Stocks Index Fund | 0.11 | FTSE Actuaries UK Conventional Gilts All Stocks | 8.7 | 4.6 | AA | UK |
| Vanguard UK Gilt ETF | 0.07 | Bloomberg Sterling Gilt1 | 9.9 | 4.5 | AA | Ireland |
| Vanguard UK Government Bond Index Fund | 0.12 | Bloomberg UK Government2 | 9.9 | 4.5 | AA | Ireland |
| Invesco UK Gilts ETF B | 0.06 | Bloomberg Sterling Gilt | 9 | 4.6 | AA | Ireland |
Source: Fund providers’ data / Morningstar (A dash means data not provided).
YTM is yield-to-maturity. ‘Lux’ is Luxembourg.
These are intermediate gilt ETFs and funds because, for most investors, intermediates offer a better balance of risk versus reward than long bonds (far riskier) or short bonds (a miserly reward).
Dedicated long or short bond allocations will be right for some people, though.
- We’ve previously explained your broader options and delved into how they behave.
- You can find more product suggestions in our low-cost index funds and ETFs guide.
There is little to separate the funds in the table. That is just as it should be! Competition between index tracker providers is fierce, so most advantages have by now been eroded away.
You can be confident you’re in the right ballpark so long as you choose a cheap bond ETF or bond fund, with a good track record among its peers.
More on that below. But first a couple of notes about the bond features picked out in the table.
Ongoing Charge Figure (OCF)
The OCF is the annual cost of the product charged to you by the fund provider, as a percentage of your holding. So if you own £10,000 worth of a fund then a 0.1% OCF means you’ll pay around £10 in fees.
Lower charges are always better. Costs matter.
Duration
Average duration is an approximate guide to how much a bond fund will gain or lose in response to a 1% change in market interest rates.
For example:
- A bond fund with a duration of 10 will lose around 10% of its market value for every 1% rise in its interest rate.
- The fund’s price will similarly jump about 10% if its rate drops by 1%.
The higher a bond’s duration, the greater the capital gain or loss as its market interest rate fluctuates.
The market interest rate of a bond is not the base rate set by the Bank Of England. The market interest rate is a product of supply and demand for each individual bond on the bond market. If the Bank Base Rate is hiked by 1%, that doesn’t mean every bond will follow suit.
Yield-to-maturity (YTM)
The expected annual return of your bond fund is its current yield-to-maturity.
This number will fluctuate as bond prices move. But the main takeaway is that there’s nothing between these products. (Note that when we refer to yield in this article, we’re talking about YTM).
Credit quality
This is a guesstimate of the financial strength of the bond issuer. (That’s the UK Government in the case of the gilt funds in the table above.)
AAA is top-notch while BBB- sets the floor for investment grade. Below that is ‘junk’.
The higher the credit quality rating, the better. It means there’s less chance the issuer will default on payments, at least according to the bond rating agencies.
Bond rating systems and verdicts vary slightly by agency but our main message would be to stick to investment grade.
In other words, don’t touch someone else’s junk.
Bond fund credit quality is the weighted average of all its bonds ratings.
Domicile
Location matters because funds based in the UK benefit from FSCS investment protection. With that you could be eligible for compensation should your investment provider go bankrupt.
True, it’s highly unlikely that you’ll ever need to worry about this provision, especially given the scale of the giant fund shops in our table. But it’s a wrinkle worth knowing about.
Moving on, how have our best bond funds performed this past decade?
Best bond funds and ETFs – UK gilts results check
Source: Trustnet multi-charting tool
We’ve expanded our product scope for this performance check. Partly because doing so illustrates some useful points about bond funds, and partly to again show there’s little to choose between good index trackers.
We’ve highlighted the candidates’ 10-year annualised returns (nominal) within the green box because the longer the timeframe, the more meaningful our comparison.
The cyan lines underscore the main indexes tracked by the best bond funds.
With friends like these…
One thing leaps out immediately from our performance check: bond returns over the period have been absolutely terrible.
A near-zero return over ten years – and stiff losses over tighter time periods – does make you wonder why you’d bother with bonds.
The fact is that unfortunately the entire asset class was smashed in 2022 as interest rates surged and rising bond yields inflicted heavy capital losses.
But counterintuitively, the prospects for bonds are much brighter now that yields are higher (and prices lower).
The reason for this is that bond yields are predictive of future expected returns. If inflation subsides to its historic norm (around 3%) then the yields quoted above would deliver a bond return slightly ahead of its long-term average of 1.4% (real, inflation-adjusted return).
In other words, bonds are now priced to deliver a reasonable return for a defensive asset, even as they also fulfil their primary role as a stock market diversifier.
How things change
When we first wrote this article in May 2021, bonds had delivered excellent 10-year returns but their low yields warned of trouble ahead.
The table below is a nice demonstration of how low yields can correlate with excellent backward-looking returns but auger grim returns in the future.
This representative fund had a terrible yield in May 2021. But its returns over the previous 10-years had been superb:
| Vanguard UK Gov Bond Fund | Yield (%) | 10yr return (%) |
| May 2021 | 0.9 | 4.8 |
| Sep 2023 | 4.5 | 0 |
Fast-forward to September 2023 and you can see the situation has completely reversed. The yield is healthy again but the 10-year returns are awful (because rising yields cause bond prices to fall).
September 2023’s 0% return over ten years is the fulfilment of May 2021’s low yield prophecy.
Boiled down, yield is the best guide we have to an intermediate bond fund’s expected return over the next decade.
No guarantees, but the asset class’s potential has largely been restored by the bond market dumping that’s burned investors – even as it causes so many to now avoid bonds like sewage on a UK beach.
Here for the duration
Back to our results check. You might look at the table and think the Vanguard UK Government Bond Index fund is the last place you want to be. After all, it’s earned nothing for a decade. And it looks worse than the rest of the field across the other timeframes, too.
Yet the same fund’s 10-year returns were ahead of the pack just two years ago! It’s table-topping performance then – and relegation form now – is mostly due to the longer duration of its holdings.
A higher duration juices your holdings when bond prices rise (and yields fall) but acts as a ball-and-chain when prices fall (and yields rise).
In other words, there’s nothing inherently wrong with either of these Vanguard bond trackers. If prices rise from here then they’ll leapfrog back up the rankings.
That makes the Vanguard pair the best bond fund choice in our table for recession protection, incidentally.
But opt for a shorter duration fund if you think interest rates can only go up or inflation continue to rise – or if you want to dial down the volatility in your bond allocation, even at the cost of some potential gains.
How to compare best bond fund and ETF results
The duration issue helps illustrate why choosing your bond fund isn’t as simple as picking the one that has scored a few extra drops of return at a particular moment in time.
A fraction of a percentage point makes little odds, and it doesn’t tell us which tracker will nose ahead next year or next decade.
Here’s what I’m looking for when I look at the performance table:
- Firstly, are any of our comparable bond funds doing something highly unusual? If one product is way ahead of the rest – or completely off the pace – then perhaps it’s not what we think it is. Deviant behaviour is a cue for further research.
In this instance, the trackers are all relatively evenly matched across five and ten years, once you factor in duration differences.
- I completely ignore one-year and three-year time periods if I’ve got better data. I never compare funds over one-year anyway. That’s too short to tell you anything meaningful. Longer is better.
Now turning to the indices…
- Are our potential best bond funds a good match for their respective index over time? (I’ve underlined the 10-year index return rows in cyan). You’d expect an index tracker to slightly lag its index, after costs.
If a bond tracker is a smidge ahead of, or behind, its index then no matter. But if it lags then strike it off your short list – begone HSBC UK Gilt Index!
You have reason to suspect one index is inferior to another? Then you can sweep its adherents off the table too.
Most intermediate gilt funds follow the FTSE Actuaries UK Conventional Gilts All Stocks index. The Invesco and SPDR Gilt ETFs moon after the Bloomberg Sterling Gilts Index, while Vanguard’s twosome chase Bloomberg’s float adjusted benchmarks.
Here again, the 10-year returns show that the indices are close competitors – with the ‘float adjusted’ index’s shortfall explained by its longer duration holdings.
Where does this leave us?
The sweet spot is getting the blend of features you want from your bond fund at a low cost. It’s only worth factoring in the returns snapshot if one tracker looks consistently superior to the rest.
There’s no point being derailed by minuscule performance differentials if you want a UK-domiciled fund that is available on zero-commission dealing with your broker.
If you’re specifically after a bond ETF (rather than a mutual fund) then the Lyxor gilt tracker is dirt cheap and has edged its index over 10 years. It was second only to the Vanguard UK Government Bond Index fund in 2021, too, despite its shorter duration.
The Invesco ETF is a touch cheaper but it doesn’t have a long-term track record yet.
The 10-year returns of the SPDR Gilt ETF look fine, but it’s twice as expensive as its cheaper rivals. I’d knock it out on that basis because high costs are a proven drag factor.
Finally, the Vanguard trackers are the way to go if you want their extra duration.
Best bond funds and ETFs – Global government bond (GBP hedged)
| Fund/ETF | Cost = OCF (%) | Index | Duration | YTM (%) | Credit quality | Domicile |
| iShares Global Government Bond ETF | 0.25 | FTSE G7 Government Bond Index | 7.4 | 3.7 | AA | Ireland |
| Xtrackers Global Government Bond ETF 2D | 0.25 | FTSE World Government Bond Index – Developed Markets | 7.5 | 3.5 | AA | Lux |
| Amundi Index JP Morgan GBI Global Govies ETF | 0.15 | JP Morgan GBI Global Index | 6.9 | 3.5 | A+ | Lux |
| Abrdn Global Government Bond Tracker Fund B Acc | 0.14 | JP Morgan GBI Global Index | 7 | 2.2 | AA | UK |
| iShares Overseas Government Bond Index Fund (UK) | 0.13 | JP Morgan Global Govern Bond Index ex-UK | 6.9 | 3.4 | – | UK |
| UBS JP Morgan Global Government ESG Liquid Bond ETF | 0.2 | JP Morgan Global Government ESG Liquid Bond Index | – | – | – | Lux |
Source: Fund providers’ data / Morningstar (A dash means data not provided).
YTM is yield-to-maturity. ‘Lux’ is Luxembourg.
The choice of global government bond funds and ETFs has exploded since we last looked in 2021. Costs have been slashed by new entrants and there’s even an ESG contender from UBS.
The downside is that only the two older iShares and Xtrackers products have a long-term track record – which is why they crest the table. The Amundi and Abrdn index trackers will notch up three year records shortly, whereas the iShares Overseas fund only launched in August 2023.
Meanwhile, the UBS ESG effort is consigned to the bottom because the Swiss bank hasn’t yet published some very basic information. (Note the blanks in our table.)
Something also seems off about the very low yield published by Abrdn, but that’s the figure it has given. I think I’d rather take a higher yield from one of the other funds, considering they’re not exposing me to much (if any) more risk.
(Incidentally, I’ve had to edit the product names to fit the the table so make sure your choice is badged GBP hedged when you select it from your broker. Some of these funds have unhedged variants but the right product will always have GBP hedged in its name.)
Now let’s do a results check before talking about why you might plump for global government bonds over gilts.
Global government bond (GBP hedged) results check
Source: Trustnet multi-charting tool
Remember, the main objective in comparing results is just to make sure there isn’t a weird outlier on the shortlist. We also want to see if any fund is consistently dragged down by hidden costs.
But the truth is we don’t have much to go on anyway because most of the products are quite new.
What we do know is that intermediate global government bond funds are typically shorter duration than their UK counterparts. That helps explain why they haven’t suffered as much as gilt funds in the sell-off.
Well, that and the fact that interest rate rises have been sharper in the UK.
Global government bonds versus gilts
Diversifying across global government bonds came into vogue in the aftermath of the Great Recession as many countries lost their cherished AAA credit ratings – the UK among them.
As government debt balloons, many investors prefer not to rely on the full faith and credit of their home country.
Strangely, so-called global government bond funds usually hold developed market sovereign debt only.
But that’s actually a good thing because the role of your bond allocation is to lower your overall portfolio risk. So steer clear of global funds that hold much more volatile emerging market bonds.3
What about the underlying indexes? It’s hard to get good information, but factsheets are out there.
As global bond funds are about spreading your bets, it’s worth knowing that the FTSE World Government Bond Index (Developed Markets) is the most diversified by country, followed by the JP Morgan GBI Global Index, and finally the FTSE G7 Index.
On that front, you might ask why would you ever go for a 100% gilts fund4, given the diversification benefits of global government bonds?
Well, you might because the gilt trackers are less costly to own, have a higher yield, and may offer marginally more crash protection to UK investors.
But ultimately that’ll all be cold comfort if the UK state’s finances do eventually go pop. Granted, that’s a nightmare scenario. But it’s also one that once seemed far less plausible than in recent times.
Don’t take currency risk
If you opt for global bonds then make sure you pick a fund that hedges its return to the pound. Doing so removes currency risk from the defensive side of your portfolio, if you’re a UK-based investor.
While currency risk may sometimes be viewed as a positive and diversifying factor for equities, the same is not true for government bonds.
Currency exchange rate fluctuations add volatility to your returns. Government bonds are there to lower it.
Some investors leave their global bonds unhedged. But betting on exchange rates is an advanced move. It’s only justifiable if you really know what you’re doing.
We’ve looked at the mixed bag of evidence for this ploy before in a US Treasuries vs Gilts post.
Don’t sweat the small stuff
From a big picture perspective, any of the index trackers gracing our tables of best bond funds (and bond ETFs) tick the right boxes.
I’ve touched on a few key details to consider. But even those differences will likely prove marginal across many years of passive investing.
The most important investing decision is diversifying between equities and government bonds in the first place.
Choose a competitive bond index fund or ETF as the main brace of your defensive asset allocation and you’ll be on the right course.
Further reading:
- To help you read a bond fund webpage
- Decode tricky bond terms lingo
- For best global tracker fund suggestions
Take it steady,
The Accumulator
Note: Earlier comments below may refer to our 2021 take on the best bond funds. We’ve left them standing for reader interest, but please do check the dates before replying!
Hi The Accumulator, thanks for this great post (as always!). Quick question – my workplace pension does not offer an intermediate bond fund but does offer index funds for long dated, short dated and index linked. Is there a rule of thumb for how to split funds between those options so as to try and replicate an intermediate fund?
@TA. We’re getting into the weeds here but surely the Vanguard Gilt ETF/funds were the best performing because they have the longest duration and the Gilt market rallying over the last 5 years+. Hence also why the’ve done worse over the last year – the Gilt market sold off 60bp. It’s not due to costs, it’s just a different longer duration index they track.
Over the past 5 years, iShares Core UK Gilts generated 24.4bp/unit duration. The worst performing was the Vanguard bond fund with 23.1bp/unit duration, so 5% worse. In bonds, you should always look at duration weighted returns, not cash-weighted returns.
If you bought a singular uk 15 year gilt that has been in existence 14 years. I assume the price of the gilt has dropped back to near the 100 pound issue price.Then interest rates jump up 1%. Would your gilt price drop by 15 %. But, then next year on its 15 year anniversary would it jump back up to the 100 pound issue price. In short what was the point. Unless you buy it after its dropped 15% so you catch the rise. Or ,thinking about it, it may have been a 15 year issue but if it has only 1 year left it would only drop 1 %. Thanks for a great website by the way.
While I’m here, does anybody know the gilt/ equity ratio of Glidepath pensions. Thanks.
I remember there was some discussion about risk on currency (GBP alas) Vs risk off currencies (ie save haven maybe USD, Swiss franc). In a crisis risk off currencies tend to appreciate. If the purpose of bonds for passive investing is to appreciate in a crisis, is there an argument to hold bond funds in a risk off currency say USD?
I’d say you’d want unhedged if the whole purpose of global government bonds is to protect you from something like your own country going to pot – otherwise you’ll go down with sterling. – At the same time as you might also lose work in such a local crash.
Paying more to lose your currency diversification?…
@ James – classic workplace pension – missing out key funds! Absolutely, you can blend durations by using the average weighted portfolio principle laid out in this piece:
https://monevator.com/how-to-work-out-your-portfolios-cost/
This piece was about cost, so multiply by each bond fund’s duration and its asset allocation to get your portfolio’s average weighted duration.
@ ZXSpectrum48k – [slaps forehead] I should have thought of that! Have corrected the post. Thank you.
@ TRS80 – there is an argument but the papers I’ve read have shown that so called risk-off currencies change over time. I wrote this piece about US treasuries which worked well in the last few downturns but didn’t help at other times:
https://monevator.com/do-us-treasury-bonds-protect-uk-investors-better-than-gilts/
@ Matthew – here’s the rational argument for currency hedging:
https://www.institutional.vanguard.ch/documents/institutional/going-global-with-bonds-uk-eu-ch.pdf
@TA – It does indeed make the case that in a 100% bond portfolio you’d need currency appreciation of >5% for USD, >10% Canadian $ or >20% Aus$ to make the volatility of not hedging worth it – but suppose it did… Suppose for some reason the value of sterling did drop like a rock, although I can imagine vanguard sees that as very unlikely and for the purposes of bonds giving discipline they would rather have that steadiness and hope nothing extreme did happen.
It does show that where you have more equities, like 60:40, a currency appreciation of 1.5% for USD to 5.6% for AUS$ would do it – not really a huge threshold. More equities would therefore make it even more marginal, probably because you need every bit of diversification in a crisis.
@Matthew- in the event you suggest, namely a massive fall in the value of Sterling, if you had a 60/40 portfolio, your unhedged, globally diversified equity fund would rocket in Sterling terms, compensating for the fall in your bond fund.
@windinthefens – exactly, it would protect you from total loss of value if sterling plummeted (which might help if that caused us to have knock inflation) – whereas because we’re globally diversified, it’s not going to kill us anyway if a different country lost currency value, so the defensive ability of hedging to retain value is limited.
Protecting the value of what you have in global terms Vs protecting the nominal number in sterling terms.
If we globally diversify but currency hedge, you are diversifying credit risk but you still have all those particular eggs in sterling, so then what is the point of buying global? Might as well but gilts and save the costs if that’s what someone wanted to end up with (ie generic first world government debt denominated in sterling).
Hey guys, hopefully a simple question but I’m still relatively new to the bonds… If I was going to choose a Vanguard bond, why take intermediate rather than long term? What’s the risk?
Any thoughts on ESG bond funds? For shares, going ESG doesn’t make a lot of difference to the companies’ cost of capital, but for bonds you could be directly lending money to shitheads, so it’s arguably a bigger deal. Typically ESG only seems to apply to corporate bonds – I haven’t seen anything equivalent for government bond funds that avoid unsavoury regimes. The country distribution for a typical EM bond fund is enough to put some of us off.
In my limited research, I’ve seen a GBP-denominated ESG corporate bond ETF from Invesco (ticker: IGBE, OCF: 0.1%) but it’s not available in my Hargreaves Lansdown SIPP. iShares also offer a GBP-denominated ultrashort ESG corporate bond fund (ticker: UESG, OCF: 0.09%).
Obviously none of this is a problem if you stick to UK gilts, which is probably the easiest solution for most of us.
@ Matthew – if you believe that sterling is prey to some catastrophic risk that wouldn’t systematically affect other currencies too, then by all means don’t hedge.
However, if you think the end of sterling is a low probability event, but want to diversify your bond holdings while retaining their ability to dampen volatility in a portfolio – best to currency hedge.
What does the bond side of your portfolio look like?
@TA – Long term my biggest pension is a DB one, which I consider to be like linkers in sterling – and if we value that by x25 the income then I’m effectively 80% bonds, linker gilts at that, not counting the house, so I’m very underweight in equities and going all into that in the sipp and Lisa. At least though it’s inflation proofed. A drop in sterling is unlikely but never say never – the purpose I believe is peace if mind, and if we’re retired eventually we’re nolonger so stuck to the UK.
But for short term emergencies rather than keeping cash beyond immediate needs like I should I use vls20 for sheer convenience and cover the risk with unused credit cards, so there’s no opportunity cost.
@Matthew – isn’t the reason to own your own country bonds or bonds hedged to your own currency is, for most people, that’s the currency they’ll spend in? Bonds are to provide stability, not return so for me, if Sterling tanks, my nominal is unaffected if I own Gilts or am hedged.
However, I have hummed and harr’d over this and do own some US Treasuries and unhedged AGBP “just in case.” But I also have temporary Spanish residency (thank you Brexit) and if we go permanent it might make sense. (But oh! The tax….)
This is a timely article, as (you may remember from previous comments over the last year or two!) I’m trying to finally an alternative portfolio, so not everything I have is invested with Vanguard.
It’s (almost) the missing piece to put an end to my procrastination/indecision. But, there seems to be one final decision to make.
So the decision is whether or not to go globally hedged, or UK (gilt) based.
I suspect there’s an argument (to diversify, and avoid indecision) for investing in both, but if so in what proportion. 50/50, 75/25, 25/75. I suspect in the long run any of the three allocations would provide similar long turn returns (and protection against volatility). Are there any that would seem more, or less sensible than the others?
Maybe 50% global (for diversification) 50% UK (for returns, and crash protection)?
P.S. Unfortunately sweating the small stuff seems to be my thing :-/
@ Kevin – the risk of long bonds is that if interest rates rise continually then they’ll take large capital losses. This piece will help:
https://monevator.com/bond-prices/
@ Jonny – I hear you on sweating the small stuff 😉 My personal opinion is it doesn’t matter. I prefer to keep it simple and choose one or the other. I suspect that over many years, you won’t notice the difference.
To that end, I chose gilts – lowest cost, marginally better crash protection. Those are my priorities. The only thing that would worry me is if the UK credit rating deteriorated faster than other leading nations. If that was my primary concern then I’d go global.
If you the incremental complexity doesn’t bother you then split them 50:50. It worked for Markowitz!
I went for a mixture of the Vanguard Global Bond Index Fund and the Vanguard US Bond Index Fund. My main reason for avoiding the GILT funds is their long durations and the accompanying interest rate sensitivity. The 7-8 year average durations of the funds I picked just made me feel more comfortable.
One question I have is whether to bother with linkers when in the accumulation phase. They seem so expensive right now.
I mostly have Vanguard LS80 at the moment to keep things simple. I’ve considered mixing a global equity fund with one or two bond funds instead, but I always get hung up on the bond allocations – how much to keep with regular gilts vs index linked – is there an optimum proportion in a portfolio with around 20% bonds? I’ve got a few decades to go time wise but not tolerant enough of risk to have 100% equities.
@ hapshade
There’s been a fair bit of discussion in the comments of the last few bond articles about asset allocation etc.
From memory TI has 60% global equities, 10% gilts, 10% linkers, 10% gold and 10% cash.
I think it depends on where you are on your journey.
I’m a way off becoming FI and an very much still in the accumulation phase so am much heavier on equities. I pretty much just keep an emergency fund in cash with a year or so expenses in bonds split 50/50 between gilts and linkers and the rest in equities. All my contributions are going into equities.
I’m comfortable with this and will maintain the years expenses in bonds regardless of returns, but I’m a decade or so away from FI so my situation may not suit many others.
@ Rosario: You write:
I believe you mean @TA (The Accumulator 🙂 ) though I don’t believe he has anything like that much in gold?
I wouldn’t want people to get the idea I had anything like such a clean portfolio! 🙂
– The Investor aka @TI, who nobody should be following too closely 😉
@TI
Yes, of course I meant to reference TA not your good self. Excuse my error.
For what its worth I think the contrasting approach of yourself and TA really is part of the value to this site. At first it was slightly confusing but I figured out what was going on fairly quickly and after that I found I really enjoy musing over the different strategies. Finding a resource which enables you to work out where you sit on the scale, and then caters to that, is really quite unique.
I think that early on in ones investing life a passive approach works really well, there’s usually lots of other things in life to focus on (growing income, career progression, young family etc etc) and the numbers are usually small. Personally I think as I’ve grow my net worth and I approach FI I am taking more and more interest in the active side of investing. Not moving away from a passive core of investments at all but certainly adding on a few active parts. Your posts really allow people like me to indulge that and grow at our own pace into that space. It would be a great loss if you were to stop writing about “the dark side!”.
I’m curious as to why anyone who does not already own nominal bonds would buy them now, when surely inflation is a serious risk in the medium term? Many well respected active investors currently avoid them altogether – I think Capital Gearing Trust and Personal Assets Trust (for example) only own linkers now. Yes, they might go up in a crash, but we don’t know when the next crash will be, and how far might their value have been eroded at that point? I understand that this article is about passive investing, but allocating to bonds at the moment feels like quite a bold active decision, which is fair enough, but if preserving purchasing power is not the priority for this part of the portfolio, then maybe holding some cash is a reasonable alternative (along with gold).
@StellaR. The 5-year inflation breakeven rate between nominal fixed-rate Gilts and inflation-linked Gilts sits at around 3.5%. So for you to outperform by holding linkers over nominals, RPI would have to average > 3.5% over that 5-year period.
In the last 20 years, there was a short period (4Q2009) where, over the next 5-years, RPI was greater 3.5% (it got to 3.7%). In all other periods it was lower, typically around 2.5-3.0% on RPI.
So what you are saying is already to a large degree priced into the market. If you believe inflation will average 4, 5, even 10% then yes, linkers are much better than nominals. That, however, is clearly an active view. What do you know about RPI that other’s don’t?
Fair point, @ZxSpectrum48K. To clarify, I’m not personally buying linkers at the moment – I agree that the ship has probably sailed and really I’m more of a gold bug – but I do hold some Capital Gearing Trust, which I add to now and again. [Against that, my DB pension is effectively an IL bond, and even if inflation remained low, I’d still regard index-linking as the best means to preserve the value of the income generated over the long term.]
@ Rosario – your comments about valuing the passive/active dichotomy in the site go straight to the heart of a debate TI and I have been having about the blog for years. He’s reticent to write about the Dark Side (though sometimes he can’t help himself) and I keep saying that even committed couch potatoes like myself love to take a walk on the wild side every now and then. So interesting that you value that split.
Re: a defensive allocation of:
10% nominal/conventional government bonds (defends against recession)
10% cash (lesser defence against recession but better against rising rates)
10% linkers (inflation defence)
10% gold (max diversification – hedge against equities, bonds and cash failing to work)
That’s not quite my allocation but I mentioned it on the other thread as a simple way to show that you can diversify against an uncertain future without committing so much to any single asset class that it’ll torpedo your portfolio returns.
So many commentators talk as if interest rates must rise without quantifying what that actually means for their portfolio, or how they’d cope in a recession when a risky portfolio plummets, or acknowledging that people have been making that prediction for over a decade and have been dead wrong.
A portfolio should be thought of as a team – each with a role to play and compensating for each other’s weaknesses.
@ StellaR – I agree, inflation is a risk. It always is. Equities, linkers and, to a lesser degree, cash offer varying degrees of protection against it.
Nominal / conventional bonds offer me the best protection against recession. Agreed, we don’t know when the next recession will hit, but that’s the point – I hold bonds because it could be tomorrow, next week, or next year. One thing is for sure though, another recession will occur.
High inflation on the other hand is not a risk guaranteed to materialise. I think everyone should be ready for it, but not to the point of believing it’s a done deal. As you say, we don’t know what’s going to happen.
I understand the normal advice is to hedge overseas bonds but I take a view that a large part of a passive global equity portfolio is held in or tied to the US dollar and if one holds government bonds to counter this, then there is logic in holding unhedged US government bonds.
My father who has lived in the US off-and on , reminds me the exchange rate was once $4 to the £ in the 1940’s when he was living there.
Looking at the level of local inflation since then the current exchange rate is consistent with that, perhaps over time the volatility works out and inflation adjusted purchasing power dominates.
Hedging is not 100% efficient and adds costs plus interest rate differentials come out in the hedging process.
Perhaps LEGAL & GENERAL ALL STOCKS GILT INDEX TRUST GB00BG0QNW27 is a good candidate for intermediate gilts with a 0.15% annual charge, discounted to 0.10% with H&L. I’m not sure about the YTM though.
Hi,
Thank you for your fantastic website.
I am new to passive investing, and currently building my portfolio.
Are inflation-linked gilts and index-linked gilts the same thing?
for example,
Vanguard U.K. Inflation-Linked Gilt Index Fund
Legal & General All Stocks Index-Linked Gilt Index Trust
Which would be best to guard against inflation alongside my Vanguard U.K. Government Bond Index Fund.
Thanks
Gary
@ Gary – yes, inflation linked and index linked mean the same thing. You’ll also come across references to linkers which is just an abbreviation of the same thing.
In principle the two funds you mention above are good anti-inflation products but there’s a potential distortion in the UK linker market.
These two pieces explain more about it, though I’m afraid it’s a lot to take in when you’re just starting out:
https://monevator.com/why-uk-inflation-linked-funds-may-not-protect-you-against-inflation/
https://monevator.com/the-slow-and-steady-passive-portfolio-update-q1-2019/
If you concerned about the points raised in the two articles above then this piece has some leads for global index-linked funds:
https://monevator.com/low-cost-index-trackers/
Check out the ‘Global inflation-linked bonds hedged to £’ section.
This ETF could also do a job but it’s new and not widely available yet:
https://www.lyxoretf.co.uk/en/instit/products/fixed-income-etf/lyxor-core-global-inflationlinked-110y-bond-dr-ucits-etf-monthly-hedged-to-gbp-dist/lu1910940425/gbp
Thank you its much appreciated.
Does it make sense to use Lifestrategy 20, adjusted to correct weight in a portfolio in order to get the desired bond allocation instead of the Vanguard Global Bond index fund? Lifestrategy seems to hold some inflation linked gilts as well as having less of a focus on U.S Treasuries.
I admit to failing to understand Bond funds at the moment.
It appear that interest rates in the UK are certain to rise of the next year (or even several).
I hold the Vanguard UK government index fund. It has gone nowhere over the last while. It’s lost 7.5% over the last 12 months.
Your duration value for it is 13 – so that implies what – that an interest rate rise of 0.5% is priced in at the moment?
Looking at the pressures in the UK at the moment, I’d be very surprised if, over the next 12 months, interest rates didn’t rise more than 0.5%.
So it looks to me that my fund has further to fall. So if I believe interest rates will rise more than 0.5% I should switch (some of) my bond fund to cash.
Certainly given rising inflation it seems on my poor understanding almost certain that the fund will fall further (whether at the 13% -> 1% ration or not) and therefore cash seems safer in a rising inflation world.
I know what I’m describing is in effect me trying to time the market, but I’m new to bond funds and am just trying to see if I’m understanding the fund and it’s likely relation to inflation over the next while.
(I have achieved FIRE due to decades of passive equity investing so bond stuff is stranger to me than equities)
Cheers
Kev
Any reason XGSG isn’t on your list of Global GBP Hedged funds? The hedged version has been around since 2011 and is pretty similar to IGLH but with a few more countries in the mix for extra diversity
Hi AMG – I took it out for 2 reasons:
Trustnet’s data showed it to be weirdly volatile. That could have been a problem with Trustnet rather than XGSG but the issue wasn’t showing up with the iShares equivalent.
XGSG is domiciled in Luxembourg which potentially puts it at a slight disadvantage vs iShares Ireland domicile because Ireland typically has superior double-taxation treaties with other countries.
I think the index you have for the Vanguard UK Government Bond Index Fund is wrong – it should be the “Bloomberg U.K. Government Float Adjusted Bond Index”. Which explains the difference between that and the Vanguard UK Gilt ETF.
Is there any reason to prefer the Bond Fund over the Gilt ETF, given the higher OCF? I see you recommend the Bond Fund in your lazy portfolios and hold it in the Slow and Steady.
@ Evan – good spot. Updated. Thank you for taking the time.
The main reason you might choose the bond fund over the ETF is if it reduces costs at your broker. For example, a relative newcomer benefits from zero dealing fees on funds and pays little for platform fees on a relatively small portfolio.
You can see that the difference in OCF has made little practical difference to return over 5 years – the longest comparable time-frame we have for the two products. Still, the ETF has the slight edge.
Has anyone got a clue what the difference is between ishares global corporate bond GBP-hedged ETFs GHYS and GHYG. Apart from the price I cannot find anything to separate them, although JustETF shows GHYG, the larger of the two, to be more volatile though performance appears identical. GHYS price is nearly 20 times GHYG, and GHYG is the newer but larger fund. Grateful for any clues.
Any reason you’ve not considered transaction cost above? My understanding is that this relates to hidden costs that the fund pays while trading (correct me if I’m wrong).
For example -The Fidelity website lists transaction costs for the iShares UK gilts all stocks index fund as 0.01% and for the Fidelity index UK gilt fund P as 0.18%. Seems like quite a big difference?
This article has been really useful to me, even if it is from 2021.
Currently all my bonds are UK based, for which I have paid the painful price over the last year. Belatedly I am looking to balance with some non UK bonds. I note though that US govt bond funds (Vanguard U.S. Government Bond Index Fund – GBP Hedged Acc) have much lower costs (OCR) than the Global bond funds you discuss – 0.17% for the above cf 0.27% for the Vanguard hedged Global bond index fund and a whopping 0,43% for the Global Aggregate Bond hedged ETF.
Given that majority of holdings in these global funds are presumably US anyway, why not reduce costs and go for the pure US version? A big saving for the price of some loss of geographical diversity?
Interested to know your thoughts.
@ incus – cheers, 2021 seems a long time ago 🙂 I too am reconsidering the wisdom of concentrating my bond holding in gilts after this year’s Trussonomic debacle.
I think your question is really interesting as it hinges on a recurring dilemma:
*Is it worth giving up some diversification potential to save on cost?*
A cost saving of 0.1% saves £10 per year per £10,000 invested.
The iShares Global Government Bond ETF (IGLH) is 51% US according to the website.
In my view, the additional diversification benefit of IGLH is a price worth paying vs concentrating in US treasuries.
I would not have worried about this ten years ago. But the election of Trump has raised significant doubts in my mind about the strength of American democracy.
So if I’m going to diversify my bonds, I might as well go the whole hog and avoid the concentration risk inherent in any single country.
I appreciate that not everyone will agree. I think you’re doing the right thing by reconsidering your approach to bond diversification. My personal viewpoint is that the rise of populism has increased the threat of any given developed world country going off the rails to the detriment of bondholders (along with everyone else!).
@ TA – thanks.
Very good points. I sincerely hope Trussonomics was a unique brief spasm, albeit one we are still paying the price for. And yes US democracy doesn’t look stable right now, but despite 4 years of Trump madness, bonds didnt tank did they?.
I am currently with Bestinvest but for various inheritance planning reasons I am probably shifting to the Vanguard platform , where my options are just Vanguard funds /ETFs I think, hence IGLH is not an option and as you pointed out Global gov bond index hedged is a gap in Van’s arsenal. Anyway I shall have to weigh up risks and costs.
Cheers
My fear with Trump was more about what would happen if he got a second term. Autocrats such as Putin, Erdogan, Orban et al typically proceed cautiously initially. The velvet gloves only come off once they have their fists firmly on the levers of power. Thankfully Trump was incompetent!
You’re right of course, though. I could be being unnecessarily alarmist. American democracy is not so fragile (I hope).
Anyway, good luck with your move and planning – I hope it all works out 🙂
I think this is out of date:
GOVG is cheaper now? (https://monevator.com/low-cost-index-trackers/)
“iShares Global Government Bond ETF is the clear leader in the best bond funds hedged to GBP category. That’s because it’s the only dedicated government bond fund in our pack.”
https://monevator.com/low-cost-index-trackers/
@ The Accumulator I’m revisiting this (still to make a decision – despite asking questions 2 years ago :-/
You previously said (here in ‘Best bond funds and bond ETFs’:
“To that end, I chose gilts – lowest cost, marginally better crash protection. Those are my priorities. The only thing that would worry me is if the UK credit rating deteriorated faster than other leading nations. If that was my primary concern then I’d go global. ”
(https://monevator.com/best-bond-funds/#comment-1288883)
And in the main post said:
“So, given the diversification benefits of global government bonds why would you go for a 100% gilts tracker?
Mainly because the gilt trackers are one-third less costly to own, offer more yield, and promise marginally more crash protection.”
In ‘How to choose a bond fund’, you later wrote:
“Gilts got pummeled relative to global government bonds when Truss and Kwarteng went on their bonkers Britannia bender.
UK government bonds have since climbed someway back out of the hole. Sanity has been restored, but this was a wake-up call. A stiff lesson in the danger of concentrating your risks in a single country.
We Brits proudly think of ourselves as members of the premier league of nations. So was this a one-off shocker or evidence we’re on the brink of relegation?
Your answer to that will determine whether you choose gilts or global government bonds. ”
I’m not trying to call you out for a contradiction. Obviously, your first post was back in 2021; You did in fact caveat in your first comment that something like this could happen; I know you can’t guarantee anything; Who was to know that the infamous mini-budget lied ahead! Etc. etc.
Given that vebose intro(!) I’d be really interested in hearing your thoughts on making allocations to bonds now (global, vs uk gilts, vs some combination of each)?
@ Jonny – Unfortunately Truss proved single country risk is all too real. In fact the last four years (at least!) has shown just how susceptible we are to having the levers of power seized by people who aren’t up to the job.
If you want to keep things simple, then isn’t this all the proof we need to just go global govies?
But what have I personally done? Personally, I’ve done nothing. I’m still 100% gilts. Why? Partly inertia. Partly because I still believe in the country and hope for better days ahead. It’s not very hard-headed of me.
In my mind, I guess I still justify it by thinking about the higher yield on gilts, cheaper costs, greater duration offering the potential of a higher flight-to-quality bounce in a recession.
I don’t think those advantages really overcome the strategic weakness of the single country risk we’ve just witnessed though. Especially when I place it within the wider context: Brexit has clearly diminished the UK’s significance in the world, not enhanced it.
It’s something that needs to be dealt with. I could come up with a new ratio: 50:50, 75:25 one way or the other.
It’s just another complication though. And the longer I invest the more enamoured I am with keeping things simple. So, if I were personally to make the change, I’d just go 100% global gov bonds hedged to GBP.
Why take a risk you don’t need to take for uncertain benefits that are quite marginal and could prove moot if the country continues to slide?
Reading the article i can see that IGLH is the idea ETF to hold for government bonds due to its high bond quality, global diversification and hedging. Im keen to find a fund that offers the same qualities as this ETF, the best i can find is the abrdn Global Govt Bond Tracker B GBP Acc (GB00BK80KQ76) fund. It is the same cost as IGLH at 0.25%, also hedged to GBP and is more globally diverse but does carry about 8% more BBB grade bonds. Is this a suitable fund replacement? as it seems to tick all the same requirements as IGLH.
As the general thinking before bondaggedon was to hold my bond allocation in Gilts. Switching to a globally diverse fund would mean going from a 100% Gilt holding to something around the 5% mark, while pushing my reliance on US to around 60%. Im not too sure i trust the America government to be any more sensible with economic decisions than bonkers Britain as the moment in time, so i am thinking about a blend of a Gilt fund and a hedged Global Government bond fund something like 40:60? Or am I just over thinking this?
Great find, Chris. I haven’t spend a lot of time on this, haven’t investigated the index for example, but the Abrdn fund looks decent.
It’s cheaper (OCF 0.14), similar amount of BBB bonds, and performance is very similar to the iShares ETF over the 3 years since launch.
Hard to say whether you’re overthinking the decision to diversify your main bond holding. I think it’s more a question of how much portfolio management you wish to put up with vs what helps you sleep at night.
Given the likelihood of US / UK government default is unlikely but not implausible (and I was reminded the other day that the price of US treasuries has been known to go up when wrangling in Congress threatens government shutdown), decisions like this are more about what makes you comfortable.
For anyone who is intrested in the geograpic breakdown % for abrdn Global Govt Bond Tracker B GBP Acc (GB00BK80KQ76) fund. As its not easy to find it is as follows:
US 48.77
Japan 18.1
France 6.39
UK 5.77
Italy 5.7
Germany 4.76
Spain 3.81
Canada 2.15
Australia 1.72
Belgium 1.4
Netherlands 1.02
Demark 0.25
Sweden 0.16
The fund also has an effective duration of 7.04
That’s fab, Chris. Thank you for taking the time. Would you mind posting any useful links you’ve found? Abrdn seem as coy about making their fund info accessible as they are about vowels.
@ The Accumulator – Yeah finding useful information for the abrdn Global Govt Bond Tracker B GBP Acc (GB00BK80KQ76) fund was not easy.
The first mention that I could find of the duration was in the July 2023 Fund Provider Fact Sheet that I found on the Fidelity website
https://www.fundslibrary.co.uk/FundsLibrary.DataRetrieval/Documents.aspx/?type=packet_fund_class_doc_factsheet_private&id=f51aa6ea-52db-42e0-8bab-652a0bb846c0&user=hrynGNcqAhY3II8Pbyv9dkZq%2fUlvqBPylcy%2bnnGZ5OyXGpRVfKqISgLfp9ZnQkDo&r=1
To work out the geographic breakdown, abrdn state they follow the JP Morgan Government Bond Global Index (Hedged to GBP) again taken from the above factsheet. This index can be found here;
https://www.jpmorgan.com/insights/research/index-research/composition
Selecting DM Sovereign > GBI Global
Sady this just displays the security name and its weight % for every bond the index tracks. So with a beer and a spreadsheet I set about calculating the geographic breakdown of the index;
US 48.77
Japan 18.1
France 6.39
UK 5.77
Italy 5.7
Germany 4.76
Spain 3.81
Canada 2.15
Australia 1.72
Belgium 1.4
Netherlands 1.02
Demark 0.25
Sweden 0.16
And just for giggles here are the S&P credit ratings for each country in the index;
https://tradingeconomics.com/country-list/rating
US (AA+)
Japan (A+)
France (AA)
UK (AA)
Italy (BBB)
Germany (AAA)
Spain (A)
Canada (AAA)
Australia (AAA)
Belgium (AA)
Netherlands (AAA)
Demark (AAA)
Sweden (AAA)
Using the AJ Bell Cost Calculator, the fund costs come out as TCO 0.25% (OCF 0.14%, Transaction 0.11%)
Considering the cost, duration, geographic breakdown and credit rating I think this fund is just as good as iShares Global Govt Bond ETF (IGLH) if not slightly better.
Great work! I’ve found these links too:
https://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=F000015IKJ&tab=3
https://www.abrdn.com/investmentsfundcentre/fund-centre#literature
I went back and forth on this one and settled on a slightly complicated split between UK Gilts and US Treasuries hedged to GBP for my fixed income. I’m also using the ERNS Ultra Short ETF to drawdown from, rebalancing once a year. 20% equal starting allocation to each.
IGLT – iShares Core UK Gilts – TER 0.07 / YTM 4.65% / Duration 8.43
IGLS – iShares UK Gilts 0-5yr – TER 0.07 / YTM 4.86% / Duration 2.08
GOVP – iShares $ Treasury Bond (Hedged) – TER 0.1% / YTM 4.55 % / Duration 5.95
IBTG – iShares $ Treasury Bond 1-3yr (Hedged) – TER 0.1% / YTM 4.98% / Duration 1.79
ERNS – iShares £ Ultrashort Bond UCITS ETF – TER 0.09 / YTM 5.7% / Duration 0.20
Average = TER 0.086 / YTM 4.95% / Duration 3.69
It might prove more aggravation than it’s worth, but the aggregate funds are quite a bit more expensive and dominated by the US anyhow. Using IGLH as the example, TER 0.25% / YTM 3.67% / Duration 7.31 – almost 3x the fees, current yield is significantly lower, and the duration is longer than I settled on for drawdown.
Just thought I’d add my 2p to the conversation.
@ Ade – Cheers for this! I think your observation that the US dominates global gov bond funds is a very fair point. It accounts for 52% of IGLH right now.
I’d add that a higher yield implies greater risk so there’s no free lunch.
I just can’t decide on my bond allocation ive got a time horizon of 20 years. So in reality there is no benefit in choosing an intermediate global gov bond fund and paying a premium over a cheaper intermediate gilts fund at this moment in time as my time horizon is way over the duration of either fund. Only thing I would be protecting myself against is the uk going pop! as i should get my capital back from both funds if held to maturity. Or am I missing understanding bonds? I also think it’s to early for me to hold linkers so I’m stuck between all global bonds set and forget , all Gilts for now and swap to global govs at a later date or a 50/50 split.
@ Chris – you can’t hold bond funds until maturity (they’re rolling investments), doubtless that was just a typo though, and you meant to say, “I should get my capital back from both funds if held for the duration.”
Yes, you will get your capital back if you hold for the duration though that’s different from earning your expected return or a real return.
Scroll down to the ‘Bond duration: making your money back’ section of this post:
https://monevator.com/bond-duration/
This post also useful:
https://monevator.com/rising-bond-yields-what-happens-to-bonds-when-interest-rates-rise/
Personally, I don’t try to duration match anymore for the reasons outlined here:
https://monevator.com/duration-matching/
I choose intermediate gov bonds for recession protection (though long bonds are plausible now interest rates have surged and inflation hopefully tamed) and short bonds / straight cash for nearer term needs.
I’ve ended up keeping my gilts rather than diversifying into a global bonds fund but I can’t say I’m 100% comfortable with that. If I’m being truly objective then I doubt the extra yield / cheaper cost of UK bonds is worth trading away the diversification protection yet I struggle to believe the UK will go pop or the same couldn’t happen to Italy, Japan, or even the US one day.
@ The Accumulator Thanks for the extra information. I guess going with the ethos of diversification which ive done on the equities side of my portfolio i really should do the same with my bonds, and as you say there really is not much difference in costs etc between global govs and gilt funds, especially when you factor in the diversification you get from the global fund. So my mind is made up its the abrdn Global Govt Bond Tracker for me.
Of my 21% allocation for bonds I’ll be allocating
16% to Global intermediate govs
5% to Global gov linkers
Hi Accumulator, I try to understand bonds but it just goes over the top of my head…
I’m not asking for advice as such, but if YOU were starting again today from scratch, and was only investing on the Vanguard (UK) platform, which (if any) bond/gilt fund/s would you add to your personal portfolio. This is for someone with approx 5-10yrs (age 49yrs) to retirement and currently 60% global equities and 40% Vanguard Sterling Short-term money market fund. Many thanks
(great site btw 🙂 )
Hi Half Full,
The fund I’m in (and I’m of similar age to you) is: Vanguard UK Gilt ETF. Vanguard don’t have a global government fund which makes the decision much simpler. I’d be happy to hold some of my allocation in the money market fund too.
Thanks, The Accumulator – your reply is much appreciated! Am i correct in assuming the fund you refer to is: U.K. Gilt UCITS ETF (VGOV)?
Also if you don’t mind me asking – why VGOV rather than something like their Global Bond Index Fund (0.15% ocf) which i believe is hedged to the pound? Could this be a tactical move based on the 3-year -32% loss reversing? Thanks again and much appreciate your responses : )
Yes, VGOV. The global bond index fund includes corporate and emerging market debt which undermine crash protection but may benefit return. I want to maximise the chance my bonds benefit from the ‘flight-to-quality’ effect during a recession and I’ll rely on equities for return.
“A bond fund with a duration of 10% will lose around 10% of its market value for every 1% rise in its interest rate.”
Should the first % be years?
Good spot, Rhino. Thanks!
Very informative post, but as you say the recent performance of bonds has been dreadful and shows that a product thought of as low risk sometimes is not. With this in mind my Sipp is balanced 80% equities 20% money market.
(CSH2) The Lyxor Smart Cash – UCITS ETF C-GBP is a UCITS compliant exchange traded fund that aims to achieve short term returns higher than the benchmark rate Sonia with extremely low volatility.
So returning about 5.2% at present with very little risk at a cost of just 0.07%
At this rate why would I risk my safe money on bonds?
I do appreciate if base rates drop back down below 4% this strategy may well need to be revisited.
Hi TA,
In light of the update, and no mention of the bond ETF I am currently invested in (eek!), I wondered if you had an opinion on it? It’s global, government bonds, GBP hedged, and inflation-linked:
GILG – iShares Global Inflation Linked Govt Bond UCITS ETF
Ongoing charge is 0.20%
Do many here use a combination of bond funds and individual gilts together, to get their desired duration mix?
I quite like the idea of using shortish duration global funds for diversification and then a few longer gilts (10 to 15 year) for precise control of longer duration bonds aligned with my horizon. Though I’ve not yet implemented that…
Great article. Excuse the ignorant question, but why aren’t index linked bonds mentioned in the main article? I can see your helpful reply TA in #30 pointing to linkers articles. It feels like we’re supposed to hold linkers for unexpected inflation, but that has just happened now! Do we (passively) continue to hold our allotted allocation (in my case 50/50 global bonds/global bond linkers)? Just after some reassurance, definitely not advice. 😉
@DaleK. Linkers immunise you against rising spot inflation. You are still exposed to changes in real yield expectations. Real yields went up 400bp, hence they lost quite a bit in value.
Conventional (nominal) bonds expose you to changes in both real yield and inflation expectations.
So whether you buy linkers or nominal depends on what you want to achieve. Protection against falling inflation and real yield expectations, buy nominals. Protection against falling real yield expectations, but not inflation, buy linkers.
A possibility for Gilts is GOLDMAN SACHS ETF ICAV ACCESS UK GILTS 1-10 YEARS UCITS ETF CLASS GBP DIS (GBPG)
Duration is just 4.5 years and cost .07%
@ DaleK – Linkers aren’t mentioned purely because I have to limit the scope of the article to make it doable and readable.
I need to follow up with a similar piece on linker funds and a piece that shows the differences between intermediates, short, and long dated funds.
Ideally, this post would be nominal government bond central and include short and long bond fund tables too.
Great name, btw.
@ JMoose – GILG is intermediate duration. I try to use shorter duration linker funds to reduce the rising real yield problem that ZXSpectrum48k mentioned.
On my shortlist:
GISG
Royal London Short Duration Global Index Linked Fund M
abrdn Short Dated Global Inflation-Linked Bond Tracker Fund
All GBP hedged, though I haven’t taken a close look at the abrdn fund yet.
@ Gary Grand – I need to write a post on that too, but you’ve answered your own question: to protect against rate drops / the next recession.
If rates rise from here I’d definitely rather be in cash. If they drop then I’d rather be in a longer-dated fund. Because we don’t know which way rates will go, intermediates are my muddy compromise. Over the long-term bonds generally beat cash.
This is why I don’t think money market funds should be thought of as safe:
https://monevator.com/money-market-funds/
@ Hariseldon58 – Cheers! That looks interesting. Short dated but a bit longer than most existing short gilt funds.
Minor observation/addition to domicile and Tax:
If you hold Gilt ETFs outside of a tax wrapper (ISA or SIPP) then the reporting status of any overseas/offshore ETFs should always be checked. If its not UK reporting/distributing then the gains are taxed as income and not capital. Offshore bond ETF distributions are also treated as ‘foreign interest’ for tax purposes (even though the underlyings are UK Gilts).
When held outside of a tax wrapper – they are not really as tax efficient as individual gilts (which are free of CGT). However, there can be a benefit to holding your bond ETF allocation outside of a tax wrapper (when you have exceeded your SIPP and ISA allowances). In times of rising yields – Gilt ETFs can be used to generate realised capital losses (by selling one Gilt ETF and repurchasing a ‘similar’ Gilt ETF), with the loss then available to be offset against capital gains.
@TA
Thank you for the clarification.
I have a couple of grand in GILG right now, and my current position puts me £80 down, which isn’t too painful to realise. [Not financial advice:] in my position would you eat the deficit and immediately put the money into something with a shorter duration, or leave it there and begin anew into something shorter with my future investments?
Thanks for a super useful and informative update @TA. I’m really looking forwards to the corresponding piece on linker and global linker funds IDC.
@Gary Grand #64: Good point. If you just want dry powder ‘on platform’, and some decent nominal yield to boot, then why not go for CSH2? After all, 5.2% beats all but one (Santander) of the ordinary savings account options (albeit slightly less than NS&I at 6.2% and some regular savers, e.g. FD 7%, Skipton 7.5%). However:
1.If you want the potential for negative correlations to equities then bonds (esp., IMO, highest quality, possibly longer duration, government bonds) are a tested solution. There is the argument here (see @TA #6) that T-Bills (and TIPS) unhedged are (in some sense) possibly the ultimate risk off asset. I don’t know if I agree with that argument or not, but it may be wise to try to diversify across conventional Gilt funds, ILGs, Global Government Bond funds hedged to Stg and, if so inclined to do so, T-Bills unhedged (there are, IIRC, some UK ETFs for the latter).
2. Will we end up looking back fondly upon 2022/3’s bond crash like we do now for 2008/9’s retrospectively ‘obvious’ buying opportunity for both bonds and shares? Or is it different this time? If you stay in cash, then it’s just a case of nothing ventured and nothing gained.
@All: For cautious decumulators who are overweight bonds + underweight equities (e.g. 70/30) could you go further to the left of the risk scale without sacrificing the return bump of the equity allocation (the 30) by say having say 70 in conventional intermediate duration UK Gilt funds, 20 in global equities and 10 in bespoke income products like Royal London Extra Sterling Yield & TwentyFour Income Fund (ABS, floating rate, short duration but lower credit quality)? More expensive for sure in terms of fees, but only applies to the 10.
Great update, thanks! Do you have an opinion on the (40%) bond/gilt side of LifeStrategy 60? I would be extremely interested if so! I also have a relative who is just about to stick everything on LS60 (for ease and simplicity). Thanks again 🙂
@ J Moose – personally I’d move to the fund I want. I don’t think this will make much difference over the long-term though it stings a bit now.
@ Half Full – It’s certainly well diversified! And overcomplicated. The thing is that the LifeStrategy funds are all about simplicity. The compromises are reasonable if you don’t want to manage more than a single fund.
I’ve got my mum in LifeStrategy because she really doesn’t want to know.
I’ve been wondering why there are no ultra short UK Gov. bond funds.
There is US 0-1 yr Treasury ETFs available (hedged & unhedged), but nothing for UK bonds… which is why have to rely on money market funds like CSH2.
Thanks for the article, my limited knowledge of bonds makes it hard to turn into strategy in my specific scenario, perhaps you can help?
I bought on these dates and hold the following:
April 19 – Vanguard Glb Bd Idx £ H Acc (IE00B50W2R13) – 7% down
July 21 – Vanguard UK Inflation Linked Gilts (GB00B45Q9038) – 38% down
July 21 – Vanguard U.K. Government Bond Index Fund GBP Acc (IE00B1S75374) – 32% down
I can afford to hold long term (e.g. until retirement, 20 years), is this the right approach as the issue is cyclical? From the bond yields article my takeaway is the best strategy is to hold if I can afford to for higher yields and for diversification. These bonds were around 20% of my portfolio (originally, valuations have shifted) vs global all cap equities.
It feels like this must be a scenario many people are facing…
Thank you!
@TA
Thanks again for the reply.
My previous venture into bonds consisted of buying a few and holding to maturity. I’m tempted to repeat the trick, but with a more conscious attempt at constructing a “ladder” of gilts.
Last time a couple of my “bonds” were convertibles. I’ve not seen that asset class mentioned in ages. Why so?
@NotThomYorke – people do talk about bond cycles but our problem really stems from the fact that we’ve witnessed an abrupt hike in interest rates from a historic low point. That turned 2022 into one of the worst years in bond market history.
If this happened in equities then lots of people would be advising each other to “buy low, sell high,” not “buy high, sell low.” The same is true for bonds.
Higher yields now mean bonds are better value than they’ve been for years. Unfortunately, we’ve also got to stare at those capital losses too, and that hurts.
Ultimately, you’re holding bonds to strategically diversify your portfolio. Bonds with higher yields are better equipped to do that than they were.
If the economy tips into recession and interest rates plummet then you’ll make back some of the lost ground.
In other words, the bonds you own still make sense, despite the losses.
What’s the point selling them – and crystallising those losses – if they’re still capable of doing the job you bought them for?
Many people will regret dumping their bonds if there’s a flight-to-quality during the next stock market crash.
As ever, it’s a balancing act. If interest rates keep rising and inflation keeps surging then more bond losses will follow. But we don’t know what interest rates will do next. Experts are notoriously bad at forecasting future rates.
I don’t know your personal situation but 20% in bonds isn’t high. In the long-term your results will be dominated by your equities. If you dump your bonds now then you won’t be diversified at all when TSHTF in the stock market.
If you haven’t seen these posts then they’re useful descriptions of how higher yielding bond funds recover their losses:
https://monevator.com/rising-bond-yields-what-happens-to-bonds-when-interest-rates-rise/
https://monevator.com/bond-duration/
The issue that’s tricky to solve is your UK linker holding:
https://monevator.com/why-uk-inflation-linked-funds-may-not-protect-you-against-inflation/
As ZXSpectrum48k noted, this fund will do well if real yields fall but it’s not a great inflation hedge sadly.
It may be better to eat the loss on that one if you’d prefer to hold a fund that’s a better match for inflation – though none of the options are ideal as the post explains.
Hopefully this helps a bit. It is a tough situation. FWIW, I hold the ETF version of your Vanguard UK gov bond fund, so know how you feel.
@NotThomYorke #77, @TA #80: You might just be in luck. Inflation’s come in lower today, contrary to expectations, and the second surprise in a row to the upside (in terms of wanting lower inflation, for lower rates). If the rate cycle is close to topping out, then bonds, especially longer duration, should do well. As always, it’s future performance which matters, not what’s just happened, however painful. Fingers crossed. Even if rates stay high, it does at least mean that, as bonds mature and get reinvested, they get reinvested at higher coupons and better YTM, thereby accelerating the process of being made whole again.
As someone who is, and has been since 2013, basically nearly all in shares myself (~90% in global equity trackers, much of rest in equity related ITs), the question which I have is: What duration (and type, conventional or IL) of UK Gilts give best expression to a ‘rates are now heading persistently much lower’ thesis? Up to last month I was in the rates are going much higher camp. But, as the data changes, so one has to assess if one needs to change one’s mind; and I’ve concluded that I do, and I have now. Basically, I am looking for the maximum capital gain upside for an unwrapped (i.e. not ISA or SIPP, as used allowances) direct Gilt holding, even at the consequence of duration and rate risk if I’m wrong (i.e.such that rates keep going up; which would presumably be due to some sort of combo of persistent high inflation, constrained supply, a new supply shock, and/or a stronger than expected economy being less responsive to existing rate rises).
@TA #75 slightly off topic but I find it interesting that you mention that the Lifestrategy funds are ‘overcomplicated’. I agree. The US versions of these are simplicity itself, just 4 funds covering US equity and bonds and world ex US equity and bonds. Very easy to understand exactly what you are buying. Here in the UK we have the other end of the spectrum with, for example, LS60 containing 17 funds! This makes it a very hard slog indeed to work out exactly what you are getting. Vanguard UK could keep it simple along the US lines but their marketing department must feel that the average UK punter prefers the complexity for some reason. Which is a shame as I like the concept but not the implementation.
@TLI: if your gilts are to be unwrapped it’s tempting to go for those ILGs that give an income yield of about one eighth of a percent. Shelter that income using your Savings Allowance. The bulk of the yield to maturity is in the capital gains and they are untaxed.
Mind you, I’m an amateur so this is not Advice.
If you are old and a-feared of Inheritance Tax then piling up capital gains may not be a bright idea.
Many thanks @dearime. I’m in the midlife desert, at t-minus 12 years to retirement, and with no kids, so my IHT planning is just to leave it all to Mrs TLI, or if she should go before me, to spend it. The benefit of there being no CGT on any gains on directly held Gilts is potentially quite attractive.
@ZXSpectrum: “In bonds, you should always look at duration weighted returns, not cash-weighted returns.”
Could you explain this in more detail please, if you have the time?
@Ade
“IGLS – iShares UK Gilts 0-5yr – TER 0.07 / YTM 4.86% / Duration 2.08”
Sorry if this is a really thick question, but what does “Yield to Maturity” mean in this context? I understand that if I bought a single gilt today, due to mature in 2.08 years then, come rain or shine, the coupon and the redemption are entirely predictable, and thereby so is my YTM as it’s just a function of the price I paid plus coupon value and redemption date.
But what does it mean in the context of an ETF like IGLS, where the fund *isn’t* just going to hold all its current holdings to maturity and then wind itself up, but is going to buy new gilts to replace the ones that mature within the 2.08 years and thereby perpetually renew itself?
I’m really missing this vital point.
Thanks
V
Valiant (86): I hold IGLS as well. Factsheet says: Weighted Average Yield to Maturity of the ETF is calculated as the average of the underlying bonds’ yields, adjusted to take account of their relative weight (size) within the fund.
Which makes sense as you say, but doesn’t give a good indication of forward performance especially as the yield curve right now is inverted and relatively volatile.
And on that note… rather than topping up IGLS I chose to buy some 1yr US T Bills at 5.4% yield… assuming I hold to maturity this beats the daylights out of most short duration funds. I don’t necessarily believe Fed Powell’s “higher for longer” speech but thought it was worth the punt now.
@Valiant
You can still use YTM as the expected return of the ETF, it’s just less clear when that would be achieved. There’s a rule of thumb that says ‘assume sometime between duration and 2x duration of the ETF’.
Some good articles about this right here on Monevator. Also on Occam Investing and on Bankers on Wheels.
@Valiant. People often think in cash allocation terms: 50:50, 60:40, 70:30 etc. That’s fine for equities but it’s not ideal for bonds. Imagine 60:40 where the Gilts are in fund with duration 2 or a fund with duration 15. The portfolio duration of the first is 40%x2 or 0.8. So, for every 100bp move in yields, the portfolio will make or lose around 0.8% (remember this is approximate). Even if yields go back to zero or double from 4% to 8%, the bond portfolio will struggle to make or lose 4% in capital terms. Contrast that with the portfolio duration of the second which is 0.4%x15 or 6. So now for the same moves we’re looking at 24% loss or gain to the overall portfolio. Even on a 30% stock market drop, the 60% cash allocation to equities would only lose 18%. That’s too much bond risk. So, two bond allocations, same cash invested, one pointless, the other too much risk.
Imagine instead you have a 70:30 portfolio. You are concerned about a big nasty recession where the stock market might drop 30%. So, with a 70:30 portfolio, you might be looking at a 21% loss. You’d like the bonds to take the edge of that loss. Say reducing it by a third or 7%. You look at the yield curve and see the last time they cut, yields went down 3% to 4%. Let’s call it 3.5%. To make 7%, you need an overall portfolio duration of about 2 since 2*3.5%=7%.
Now you are only willing to allocate 30% to bonds. You need 2/0.3 or a fund with a duration of about 6.66 years. You look down the list of preferred funds and your favourite has a duration of 10. So not as to over allocate to bonds, you only put =6.66/10*30% = 20% in that fund. The residual 10% stays in cash.
If this sounds a bit like TA’s recent article on duration matching, then that’s because it is. Essentially, you start with the portfolio bond duration you want (the risk you want) and reverse out the bond and cash allocations that requires.
Thanks @ZX (#89), you’ve gone a long way to answering a question I’ve had rattling around in my head, specifically how bond duration risk should be applied to the basic long-term equity, govt bond, cash portfolio.
I’m not sure I’ve seen it expressed or calculated it in terms of risk vs. equity quite like this. Most of the articles I’ve read talk about using it for a future expenditure matching etc. When what I’m really interested in is how to use bond fund duration to calibrate an offset to a 2008 style crash and recession for example without taking on too much risk. I’m conscious each crash is different, but the ‘flight to quality’ scenario is where I expect the govt bond holding will be most effective.
I’ve had a play around with the basic tools I have available, using a mix of a Gilt fund (IGLT) and US Treasuries (GOVP) blended with cash to hit various durations, using the recent ‘COVID crash’ to observe the effect.
One half of my brain is starting to think my target duration in drawdown of ~4 is not enough risk as the positive move mid-March 2020 is pretty mild. The other half reminds me this portion of my portfolio is for primarily security of expenditure, and a lower duration would have kept the recent 2022 capital losses manageable.
It’s probably an unrealistic expectation to find a goldilocks number, but your comment makes me think I can use more than just rules of thumb to find that sweet spot. I just need to work a bit harder to calculate the best trade off.
Been thinking.
If anyone wants a (safer?) bond fund instead of a money market fund, probably 0-1yr US treasury hedged (ticker: TIGB) will give similar performance whilst US & UK central bank rates are in ~lockstep.
Back in 2021 (sorry – I’ve been reading all the old comments!) @Matthew wrote “Long term my biggest pension is a DB one, which I consider to be like linkers in sterling – and if we value that by x25 the income then I’m effectively 80% bonds, linker gilts at that, not counting the house, so I’m very underweight in equities and going all into that in the sipp and Lisa.” That logic seemed compelling. Applying it to my own situation, my DB pension represents about 60% of my notional “total pot”, so I thought maybe I should shift my DC pot into 100% equities (at the moment it’s 70:30 equities/bonds – basically 60:40 shifted arbitrarily riskier in recognition of the guaranteed baseline income from the DB). But then I remembered “sequence of returns risk”. Imagine my first year of retirement. I probably can’t live off the DB, so I’m going to need to draw down on my DC pot a bit, and if that coincided with an equities crash, I’d have to sell more of them than I’d like, which points me back towards a conventional allocation for the DC pot. At the moment I’m just flip-flopping between the two points of view. Thoughts, anyone?
@Algernond #91: Agreed. I tend to see US Treasuries as the arguable reference risk free asset with ultra short duration TIPS the paradigm as minimum term and unexpected inflation risk.
Of course risk free can be return free, but that’s a lot better than return free risk, which sadly is what a static bond allocation delivered in 2022.
My sense is that an investor seeking total return in fixed income should consider something along the lines of the following questions:
1. Is there any benefit to taking on non-sovereign risk (i.e. default risk)? CBs are at 6.5% and UK gilts 4.5% with Treasuries at 5%. So for me the answer is ‘no’ to that as not enough extra reward for additional risk.
2. Am I holding to maturity and rolling over or am I holding in the hope of a return and selling or at least top slicing if achieved? For me its the latter. If the former though, then yield to maturity will be more important than duration risk.
3. If duration risk is important to you, do you then think that long term market rates are going up or down? If you think up, steer clear of long duration and possibly give bonds a miss and go for cash instead. If though you think down, then maximising duration maybe makes sense.
Of course, no one anywhere knows what happens next to long term market rates. If I could ask Aladdin for one financial data point from the future it would be the YTM of newly issued 30 year US Treasury Bills in say 2035 (i.e. maturing in 2065).
@TLI
‘ultra short duration TIPS’ – I don’t see any ETF or other fund for those (either unhedged or hedged) … ?
@Algernond #94: you’re right. There doesn’t seem to be one in the UK, but ii (and I think Interactive Brokers) allow multi currency accounts which may allow direct purchase of TIPS. I believe the IBkr FX rates are low, but I don’t have an account with them myself.
@TLI – I have an IKBR account, and you can buy US treasuries in their trading account, but not ISA…. their FX rates seem to be the best of all UK brokers from what I can tell. When I trade foreign shares in my ISA with them, I get charged < 0.1% FX
@David C – I’m in a similar position, with both DB and DC funds, so I’ve faced the same question.
I accept the theory that my DC should be 100% equity, but I also know that in reality a substantial crash isn’t something I’d want to experience with that positioning.
As you hinted, it’s much better to work backwards: decide how much DC income you want to be ‘safe’ and pick an equity % that fits with that framing. To me, that’s the far more pragmatic and realistic solution.
@ZX another thanks from me for post 89. I hadn’t seen it framed that way, but it fits well with Hale’s differing advice for people on bonds, depending on the equity % they hold.
@David C, that is an excellent point. I’d been thinking to rejig my asset allocation to count DB pension as bonds and up the equities in the DC part, but you’ve given me pause.
The usual assumption for a rebalanced portfolio – the basis of SWR calculations – is that when equities are down you will live on the bonds (indeed even sell bonds to rebalance into equities), but as you say you can’t do this if your ‘bonds’ are a DB pension, so the usual SWR numbers may not be applicable. I wonder if a better mental approach is to consider the DB pension as cancelling out a big chunk of living expenses and the remaining expenses are covered by the DC pot. Then you choose the allocation of the DC pot according to how flexible you can be in the top 40% of your spending and how much you want to trade off probable higher income vs increased risk of serious belt tightening.
I’m still firmly in accumulation territory, but sequence of returns risk applies to accumulation too. Food for thought.
@ David C et al – any reliable income stream that’s available on day 1 of retirement (e.g. DB pension, State Pension etc) can just be deducted from your income requirement.
What’s left over is the income that must be supported from your volatile defined contribution pot.
Assuming your sustainable withdrawal rate will be anywhere from 2.5%+ then I’d stick to a conventional allocation. For example, 60/40 or 70/30 for retirements of 25+ years.
If your SWR is 2% or less then you can probably do what you like – you’re unlikely to run out of money – but it still makes sense to keep a minimum 10% in bonds. More depending on risk tolerance.
If your DB pension arrives some years after your retirement date, and you’ll rely on DC pension to plug the gap, then this piece from Early Retirement Now is helpful on the SWR bonus you can award yourself:
https://earlyretirementnow.com/2017/07/19/the-ultimate-guide-to-safe-withdrawal-rates-part-17-social-security/
I use this to judge the SWR tailwind I’ll get from the State Pension.
Obviously SWR is higher if you expect to spend DB pension income on top of whatever the DC pension can support.
In accumulation, it makes sense to me to calculate the capital value of a defined benefit pension and think of that as the bond portion of a larger portfolio.
But with 10 years to go until retirement, I’d start upping the bond allocation in my DC pension to cushion it against a crash ruining my plans.
There’s also a nice rule of thumb in the latest edition of Tim Hale’s Smarter Investing to help a pot deal with sequence of returns risk:
Hold 10 years worth of essential expenses plus 5 years worth of nice to have cash in bonds.
That would provide enough fixed income to get you through most crashes:
https://monevator.com/bear-market-recovery/
On the fund profile on A J Bell the Vanguard UK Gov Bond Fund shows Yield of 2.05%, not 4.5% as in the table above. Has the yield halved in the last couple of weeks, or are these different yield figures? What does £100 invested in this fund today get?
@ Mike T – by the looks of things that’s the distribution yield i.e. interest paid over last 12-months.
Vanguard publish yield-to-maturity here (it’s currently 4.6%)
https://www.vanguard.co.uk/professional/product/fund/bond/9148/uk-government-bond-index-fund-gbp-acc
Yield-to-maturity is effectively the annual expected return for an intermediate fund if you hold to duration. So if you hold this fund for 10-years you can *expect* to earn 4.6% annually for next 10-years. That’s not the same as what you *will* earn though. Literally nobody knows that. It’ll depend on future path of interest rates.
The expected return is just a best guess based on a known correlation between bond yield-to-maturity and return over time.
You’d also need to deduct inflation from any investment’s return to get its real return.
I don’t see any reference to inflation-linked bonds. Why is that, please?
Hi Tom – inflation-linked bonds need their own post. It’s on my to-do list but have got to it yet. There’s some leads here though:
https://monevator.com/why-uk-inflation-linked-funds-may-not-protect-you-against-inflation/
https://monevator.com/low-cost-index-trackers/
I am comfortable owning a global equity tracker but struggling somewhat to rationalise which bond fund I should go for. Every option seems like an ‘active’ choice. I have a reasonable investment horizon to retirement and looking to start allocating a small percentage (5-10%) of my portfolio to bonds with a view to incrementing this over the coming years. Based on my situation, I am considering something like Vanguard U.K. Long Duration Gilt Index Fund (VUKLDGA). The rationale for this is the recent trajectory of interest rates (not that I can predict future trajectories) and the duration of the fund versus my investment horizon. I was wondering if anyone here has any thoughts on VUKLDGA or considering owning? There seems to be a general leaning towards intermediate duration bond funds but even this feels a bit like an ‘active’ allocation.
Hi D_D,
I’d say the passive choice re: bonds is allocating to bonds that best match your strategic objectives – as opposed to hoping to pick the winners.
So long bonds would be most appropriate for an equity heavy portfolio that you don’t intend to tap into for a couple of decades nor mind the volatility associated with long bonds. In this case, long bonds are most likely to zig when equities zag (relative to short or intermediate bonds). The trade-off is that long bonds are most vulnerable to inflation and other interest rate rises.
Hopefully this piece will help you think through your choices:
https://monevator.com/how-to-choose-a-bond-fund/
@D_D — Just to add to what @TA wrote, I like this take from Rubin Miller, which argues persuasively that bond allocation *should* feel trickier, and be more personal:
https://www.fortunesandfrictions.com/post/don-t-take-it-personal
You need to have a big think about your time horizon, your risk tolerance, your aims, and your likely interest in rebalancing and tinkering over the next few decades to come up with a good fit for bonds.
At least they’re promising a should-be fairly decent return from here, post the rout. (Assuming inflation abates)
@The Accumulator and @The Investor – thanks both for your responses. I’ve not come across Rubin Miller before and looks like an interesting resource.