Three Bond Funds in Four Beat the Market Over the Past Year. Against a Fairer Ruler, 65% Did
Against the index closest to each fund’s strategy, 65% still won over the past year; over 10 years, fewer than half did — 45%, versus 56% against the Agg. A fund that beats an all-investment-grade index with junk and bank loans may be showing risk taken, not skill.
By Sean Anees Saifi · Capital Wealth · Published Sunday, September 27, 2026 · Source: The Wall Street Journal, September 26–27, 2026 weekend edition, whose market figures are the Friday, September 25 close (Exchange)
Key Points
Over the past year 75% of fixed-income funds beat the Bloomberg U.S. Aggregate Bond Index, versus 40% of U.S. stock funds beating the S&P 500. Of 2,726 bond mutual funds and ETFs Morningstar tracks, 1,229 use the Agg as their primary benchmark.
The Agg is all investment-grade: about half Treasurys, a quarter agency-backed, most of the rest high-quality corporates, mostly maturing in 10 years or less. Yet 131 of the funds benchmarked to it are junk-bond funds, 62 are nontraditional, 43 hold bank loans, 24 are municipal and four are emerging-market.
Janus Henderson’s Income ETF shows itself beating the Agg by more than 2 percentage points annualized since its late-2024 launch; it holds 27% bank loans and related, 23% junk and 9% non-agency mortgages, all zero-weight in the Agg. Janus says the presentation follows SEC rules requiring a broad-based index.
J.P. Morgan Asset Management’s site said over 90% of its active fixed income beat passive benchmarks over the 10 years to December 2025; a spokesperson told Zweig the disclosure needs updating, since the figure uses each fund’s secondary performance benchmark.
Measured against the closest-matching index, 65% of bond funds still won over the past year, 10 points fewer than beat the Agg; over 10 years fewer than half did — 45%, versus 56% against the Agg (Morningstar, data through Aug. 31).
75%
bond funds that beat the Agg over the past year
65%
beat the index closest to their strategy over the past year
45%
beat their best-fit index over 10 years (56% beat the Agg)
1,229
of 2,726 bond funds using the Agg as primary benchmark
Beating the Agg with 23% junk and 27% bank loans is a little like winning a footrace against someone carrying your luggage.
In one line: Beating the Agg can mean holding risks the Agg doesn’t: against best-fit indexes, 65% of bond funds won over the past year and 45% over 10, and those risks can bite just when you need the fund to be boring.
Here’s a statistic that should make you suspicious the moment it makes you happy: over the past year, 75% of bond funds beat the Bloomberg U.S. Aggregate Bond Index, while only 40% of U.S. stock funds beat the S&P 500. Are bond managers really that much smarter? Jason Zweig’s answer in this weekend’s Intelligent Investor column is no — the Agg, as the index is known, doesn’t measure what a lot of the funds waving it around actually do. And with some Treasury yields at a near-quarter-century high, plenty of people are about to go shopping with that ruler.
The Agg is all investment-grade: roughly half Treasurys, another quarter agency-backed, most of the rest high-quality corporates, mostly maturing in 10 years or less. Of the 2,726 bond mutual funds and ETFs Morningstar tracks, 1,229 use it as their primary benchmark — including 131 junk-bond funds, 62 nontraditional funds, 43 bank-loan funds, 24 municipal funds and four emerging-market funds. The Agg holds none of those things. Zweig’s exhibit A is Janus Henderson’s Income ETF, which shows itself beating the Agg by more than 2 percentage points a year since its late-2024 launch; the fund has 27% in bank loans and related holdings, 23% in junk and 9% in non-agency mortgages. Janus says the presentation follows SEC rules requiring a broad-based index, and that no secondary index fits its style.
The fairer test
J.P. Morgan Asset Management — part of JPMorgan Chase (JPM) — had a site claim that over 90% of its active fixed income beat passive benchmarks over the 10 years through December 2025; a footnote says that’s a share of assets, not of funds. A spokesperson told Zweig the disclosure needs updating and that the 90% actually rests on each fund’s secondary performance benchmark. That secondary index is the fairer test, and it deflates the story: 65% of bond funds beat their closest-match index over the past year, and over 10 years 45% beat the best-fit index versus 56% beating the Agg. Michael Markov of Markov Processes International puts the danger plainly: a riskier fund’s win over the Agg can leave investors crediting skill for what was really risk they didn’t know they’d taken.
Our read
A bond sleeve has two jobs, income and safety, and a fund that got past the Agg by taking on credit risk can fail the second job at the moment it matters (IN02). Zweig points to history: top-quality paper, especially Treasurys, cushioned the 2008-09 crash; in 2022 yields were too low to cushion anything. Hailey Gordon of CV Advisors argues that above 5%, high-quality bonds can work as stabilizers again. We’d take the quality point without the maturity bet: the desk’s safe money is in Treasury bills and floating-rate paper (SGOV, USFR), and long duration stays on the avoid list — the Agg itself yielded 5.460% in the Journal’s table this week, and its 52-week total return was still −1.002%.
The practical test takes a minute with a fund’s fact sheet: find the benchmark it prints, then the secondary index it’s allowed to print, and if the two disagree by a mile, the return you’re admiring probably came with luggage. Anyone whose bond sleeve is there to be boring should know what’s in it before the next credit scare says so — the statement won’t say junk, so spend fifteen minutes with the holdings list. “Just make sure their success isn’t an illusion,” Zweig writes.
What It Means For Your Portfolio
Hold — judge a bond fund by its own index, not the Agg
No portfolio action — the desk’s safe money already sits in bills and floating-rate paper, and this column is a good argument for keeping it there: a bond fund can beat the Agg by not being the Agg, and against a fairer ruler fewer funds win.
General planning principles, not advice for anyone in particular. Before admiring a bond fund’s outperformance, read its holdings for junk, bank loans, emerging-market debt or non-agency mortgages, then compare its return with the index built for that strategy, not the Agg. If the fund is the safety sleeve of a retirement plan, credit risk is a bug, not a feature.
At today’s yields, quality finally pays: the Journal’s table shows the Agg itself at 5.460%. That’s the argument for owning the boring index or short Treasurys directly rather than paying a manager to beat it with risk you didn’t order.
