Unconstrained bond funds gain momentum as investors turn away from benchmarks

Shackled to the index: the constraints on investors of benchmarking

While there may be advantages of managing bond funds according to specific indexes – ease of performance comparison and asset-liability management being the two most obvious – these are outweighed by the limitations of such a rigid approach.

If the index does badly, it stands to reason that a strategy closely tied to it will too. And if that index is also skewed towards one particular sector – as many corporate bond funds have been to financials – then a lack of diversification is also likely to