The passive attack on bond markets

The first passive bond fund launched nearly four decades ago, and ever since then people have mostly made fun of the whole idea as preposterous. To be fair, there are some solid reasons for scepticism: — The bond market is less efficient, which means more opportunities for active managers. — Their fees are also generally lower, making cost a milder headwind.

Although it’s primarily an equity benchmarking shop, S&PDJI’s The Hare and the Tortoise: Assessing Passive’s Potential in Bonds is fascinating. As Tim Edwards, Anu Ganti and Agatha Malinowski point out, while passive fixed income investing started far later than passive equity investing it is actually growing considerably more quickly.

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