Core bonds

October 2024

This paper serves as a primer on “core” bonds, which are often referred to as investment grade bonds. Few investors question whether investment grade bonds can provide portfolio benefits. High quality bonds have historically been used as “anchors to windward” in diversified portfolios.

In this paper, we briefly discuss the composition of the core bond market, as proxied by the Bloomberg Aggregate Index. We discuss how the market has evolved over time, and what those changes imply for investors. We further discuss the diversification benefits of investment grade bonds and their potential role in a diversified portfolio. Finally, we address implementation options, including the active versus passive decision.