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Market insight: Revisiting active versus passive in fixed income

“Active versus passive” is one of the most significant decisions facing DC retirement plan sponsors today, with no shortage of opinions on the debate.

Although passive investing has clearly gained favor over the last decade, arguments for passive equity strategies generally do not apply to fixed income.[1] In fact, most active fixed income managers have a proven track record of outperforming market indices and the difference between active and passive strategies is significantly smaller.[2]

And with aging plan participants, the demand for fixed income will continue to increase for many of them as they seek to mitigate risk into retirement. This demographic shift is coinciding with a significant change in the fixed income market, as interest rates have finally started to rise.[3]

So how can DC sponsors best evaluate passive and active strategies’ ability to deliver optimal retirement outcomes? Check out Voya’s latest market insight paper: New Risks Emerge for Aging Plan Participants: Revisiting active versus passive in fixed income to learn more.

[1] Source: Morningstar and Voya Investment Management. Net returns based on Morningstar Intermediate-Term Bond category; rolling 5-year time periods on a quarterly basis (21 total time periods).

[2] As of 06/30/2018. Source: Morningstar and Voya Investment Management. The Intermediate Bond universe is represented by Morningstar’s U.S. Fund Intermediate-Term Bond category. The U.S. Equities universe is represented by Morningstar’s U.S. Fund Large Blend category. The passive sleeve of each universe comprise strategies identified by Morningstar as index funds. The equity universe was screened to remove index funds that include numerous short positions, track a proprietary, non-standard index and include high levels of emerging markets and preferred securities.

[3] This commentary has been prepared by Voya Investment Management for informational purposes. Nothing contained herein should be construed as (i) an offer to sell or solicitation of an offer to buy any security or (ii) a recommendation as to the advisability of investing in, purchasing or selling any security. Any opinions expressed herein reflect our judgment and are subject to change. Certain of the statements contained herein are statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation, general economic conditions, performance of financial markets, changes in laws and regulations, and changes in the policies of governments and/or regulatory authorities. The opinions, views and information expressed in this commentary regarding holdings are subject to change without notice. The information provided regarding holdings is not a recommendation to buy or sell any security. Fund holdings are fluid and are subject to daily change based on market conditions and other factors. Past performance is no guarantee of future results.