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Fund Spy

Handle These Bond Categories With Care

Bull markets, heavy inflows, and aggressive strategies can make for a risky mix.


It’s unlikely the next big bear market for bonds will resemble the 2008 financial crisis. But it’s far enough back in the rearview mirror that the risks of forgetting its lessons are arguably crystallizing. Look at asset flows into some of the Morningstar Categories most badly burned during the crisis, combined with the fact that bonds have essentially been on one very long bull-market run. Yields are so low, and credit-sensitive debt arguably so richly priced, that even if Treasury rates remain stable and low, economic trouble has plenty of potential to hurt riskier bonds.

Each of the following categories has an unusual factor or feature, but they all share the commonality of having some of the largest drawdowns during the financial crisis, taking a long time to recover, and having positive inflows thus far in 2019 and strong flows overall during the past five years.

Eric Jacobson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.