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Why unconstrained bond fund skepticism is justified (think 2008, not 2013) and why RIAs should say: None of the above

Brent Burns counter-dissects the Sanders Wommack vivisection of an article written by experts from LPL and Google

Author Guest Columnist Brent Burns October 17, 2014 at 5:44 PM
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Brent Burns: A bond fund is simply a mutual fund that happens to own bonds (or in many cases derivatives) with no obligation to pay back anything.

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Mentioned in this article:

Investment & Wealth Institute
Top Executive: Sean Walters

Morningstar, Inc.
Top Executive: Joe Mansueto



October 17, 2014 — 7:00 PM

I certainly don’t mean to be a nudge on this because I think what the writer is saying makes sense but…

Citing 2008 as the poster child for risks of unconstrained bonds funds is, in my view, not a real good example. The reality of it is that in 2008 everything correlated…in a bad way. It wasn’t just unconstrained bonds. Also- I would imagine that if there was any spread product in the dedicated strategy cited- those bonds didn’t do so well either.

To me the real discussion should be around the utilization of SMBA- separately managed bond accounts vs. mutual funds. So whether it is a dedicated approach, active, spread yada yada- a separately managed account makes more sense for reasons the writer mentioned. It is doable for some but not everyone.

Lastly- dedicated or immunized investment strategies are not new- been around for quite a while.

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