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Home > Blog > Expectations v. Reality of Unconstrained Bonds

Expectations v. Reality of Unconstrained Bonds

Investors’ fears of rising interest rates of traditional bonds, have shown an influx in these “go anywhere” funds. With a focus on returns, many investors don’t understand the risk. In the category of a nontraditional bond fund, they hold a large percentage of the portfolios in high-yield bonds, which have huge potential for default. Some of the funds are full of derivatives, along with emerging-markets bonds and illiquid bank loans. Popular unconstrained bond funds suffered declines of 25% during the 2008 financial crisis.

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