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Beyond the Agg Index: Unleashing the Potential of Core-Plus Bond Strategies

When it comes to portfolio construction, the word ‘core’ often gets used a lot by financial advisors and media. The idea is that this group of funds—often indexed/passively managed—serves as the base of a portfolio, driving long-term returns. When it comes to fixed income and bond investing, core often means the Bloomberg U.S. Aggregate Bond Index or the Agg for short.

However, the Agg isn’t perfect. Thanks to its static nature and how it’s constructed, there are some issues with the index. We saw those issues come to fruition last year as the Fed raised rates.

To that, a core-plus fund could be an interesting option for fixed income investors. By allowing managers to slightly tweak the Agg, better returns and higher yields can be found. It’s here that fixed income seekers can win.

The Issues With the Agg

Moving Beyond the Agg Index

Making a Core-Plus Play

The Bottom Line