Morningstar argues in favor of active fixed income

November 14, 2025

On August 28, 2025, Morningstar published, “Why the Bond Market Is Fertile Ground for Active Management,” an in-depth white paper that argues that the unique characteristics of the fixed income market create enduring opportunities for skilled active managers. From Morningstar’s perspective, while passive strategies may be effective in certain “liquid, higher-quality and homogeneous” areas of fixed income:

 

  • Concentrated ownership and infrequent trading in most fixed income issues result in market inefficiencies that active managers can exploit to add value.

  • The sheer complexity of many fixed income instruments also produces inefficiencies that active managers can capitalize on through careful security selection. 

  • Passively replicating fixed income indexes can result in undue risk that can be costly during periods of market distortion.

 

Bottom line: Morningstar makes a strong argument that investors can often benefit from active fixed income. At the same time, Capital Group has always believed in active management, both in equities and fixed income. Last September, we wrote an article asking the question, “Can investors gain an edge with active fixed income?” Our definitive answer: Yes, they can.

In short, Morningstar and Capital Group agree that in many cases, active fixed income management can potentially offer significant advantages over passive strategies.

 

Read more at Morningstar.com and check out our article on why we believe investors can gain an edge with active fixed income. 

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