“For investors, particularly self managed super fund investors holding unallocated cash from super contributions made at financial year end, investing in an actively managed Australian bond fund might be a sensible option for generating income and reducing portfolio volatility,” Mr Dorrian said. “Actively managed bond funds are also flexible compared to term deposits because they can move in and out of debt securities to gain the best returns and there are no break fees.”

PIMCO’s Australian Bond Fund returned 7.48% per annum in the 10 years to June 30, compared to 7.21% per annum for Australian shares (as measured by the S&P/ASX 200 Accumulation Index, which includes dividends).

“The outperformance of the Australian Bond Fund compared to Australian shares is a significant achievement when you consider that bond investors have had a much smoother ride in financial markets than investors in Australian shares,” said Mr Dorrian.

The Australian Bond Fund, and the wider Australian bond market, as measured by the UBS Composite Bond Index, also outperformed Australian shares over five year and three year periods. In the five years to June 30, Australian bonds returned 6.50% per annum versus 2.38% per annum for Australian shares. Over three years, the returns were 8.06% per annum for Australian bonds versus 0.32% per annum for Australian shares.

Regarding global bonds, the pattern was similar, with PIMCO’s Global Bond Fund returning 9.23% per annum over a ten-year period versus -0.14% per annum for global shares (as measured by the MSCI World Accumulation Index, unhedged), with less volatility.

“What is important is that PIMCO’s actively managed bond funds have outperformed share markets and their own benchmarks over the long-term. Bonds diversify portfolios and can provide a differentiated stream of returns in times of market uncertainty and volatility,” Mr Dorrian said.

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