The Rise of Passive Bond Investments

Fixed Income Chart of the Month: February 2023

More investors are favoring passively-managed bond strategies, as evidenced by the growth in bond funds and ETFs over the past two decades. We believe that passive index investing is difficult in the bond market. Unlike stocks, most bond indices have thousands of securities and cannot be replicated in a passive investment. For example, the Bloomberg U.S. Aggregate and Bloomberg Municipal Bond indices hold 13,000 and 56,000 securities, respectively. Most investors are familiar with passive investing in stocks, but many are unaware of the rise of passive investing in bonds.  

Passive Bond Investments Reached 38% in 2022, Up Nearly 50% Since 2017

Data as of 12/31/22. Source: Bloomberg.

  • As investments in bond funds and ETFs continue to grow, more investors are favoring passive bond funds.
  • The combined AUM of bond funds and ETFs was $5.2 trillion as of December 2022.
  • The percentage of passive bond fund and ETF investments reached 38% in 2022, growing nearly 50% since 2017.

Learn more about SBH’s Fixed Income Strategies.

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