Quantcast
The MFWire
Manage Email Alerts | Sponsorships | About MFWire | Who We Are

Subscribe to MFWire.com's News Alerts [click]

Rating:Are Fundsters Cherry Picking Bond Bogeys? Not Rated 0.0 Email Routing List Email & Route  Print Print
Monday, September 24, 2012

Are Fundsters Cherry Picking Bond Bogeys?

News summary by MFWire's editors

Bond fund PMs are playing games with their bogeys. That is the contention of Kirsten Grind's Wall Street Journal article. Is she just "Monday morning quarterbacking"?

Grind writes that bond funds managers have been trying to "make themselves look better" by benchmarking their funds to safe indices even as they invest in risky bonds. The SEC requires funds to use an "appropriate broad-based" index for comparison but doesn't make any specific requirements.

Grind posits that this vague rulemaking lets bond fund managers game the system.

Morningstar ran the numbers for the WSJ and found that the tracking error for bond funds has edged higher the last few years. The number is now at 2.20 percent for the 12 months through August. The tracking error was 1.95 for the year before, and 1.37 percent in the five years before the financial crisis.

Some of the biggest and most successful bond funds have significant tracking error, Grind reports. She singles out the Pimco Total Return Fund, the Oppenheimer Global Strategic Income Fund, and Putnam's Diversified Income Trust fund for veering from their benchmarks.

The Pimco fund, Grind writes, looks great against its benchmark because it has sold its holdings in U.S. Treasuries. This isn't a secret strategy — at a conference last week Bill Gross bragged that his fund can yield great returns compared to its index because it doesn't have to hold a specific percentage of Treasuries.

Oppenheimer CIO Art Steinmetz told Grind that yes, his company's Global Strategic Income fund, with a 7.5 percent tracking error, has diverged quite a bit from its index. But he said that "the fund frequently changes its holdings, and it wouldn't make sense to change its benchmark often."

The full story is here. 

Edited by: Chris Cumming


Stay ahead of the news ... Sign up for our email alerts now
CLICK HERE

0.0
 Do You Recommend This Story?



GO TO: MFWire
Return to Top
 News Archives
2024: Q2Q1
2023: Q4Q3Q2Q1
2022: Q4Q3Q2Q1
2021: Q4Q3Q2Q1
2020: Q4Q3Q2Q1
2019: Q4Q3Q2Q1
2018: Q4Q3Q2Q1
2017: Q4Q3Q2Q1
2016: Q4Q3Q2Q1
2015: Q4Q3Q2Q1
2014: Q4Q3Q2Q1
2013: Q4Q3Q2Q1
2012: Q4Q3Q2Q1
2011: Q4Q3Q2Q1
2010: Q4Q3Q2Q1
2009: Q4Q3Q2Q1
2008: Q4Q3Q2Q1
2007: Q4Q3Q2Q1
2006: Q4Q3Q2Q1
2005: Q4Q3Q2Q1
2004: Q4Q3Q2Q1
2003: Q4Q3Q2Q1
2002: Q4Q3Q2Q1
 Subscribe via RSS:
Raw XML
Add to My Yahoo!
follow us in feedly




©All rights reserved to InvestmentWires, Inc. 1997-2024
14 Wall Street | 20th Floor | New York, NY 10005 | P: 212-331-8968 | F: 212-331-8998
Privacy Policy :: Terms of Use