No aggregate UK bond fund

aroominyork

I'm surprised there are no aggregate UK bond funds. I would have thought there are people who want a govt/high grade corp bond index fund with home bias, but I guess not enough for such a fund to exist. Any thoughts, anyone?

InvesterJones

What do you mean by aggregate? There are UK investment grade bond funds.

aroominyork

An aggregate bond fund holds govt bonds and also high quality corporate bonds. For example, Vanguard's global bond index, which is about 60% govt + 40% corporate. So I am thinking about a fund which would hold gilts and high quality (not BBB) UK corporate bonds.

InvesterJones

Most institutes classify high quality/investment grade as BBB and above, if you're defining your own subset it's going to be hard to find a premade fund so you might have to make your own.

aroominyork

I don't want it, just curious it doesn't exist. I haven't checked but I'm pretty sure the corporates in aggregate funds like the Vanguard one, AGGG or plenty of others are higher quality than the borderline BBBs.

masonic

I believe a number of active funds can invest in government and corporate bonds, but tend not to hold much of the former, as they are perceived as a drag on returns.

For an index fund, perhaps the relatively long duration of UK government debt is off-putting. Probably better for a passive investor to combine an intermediate duration gilt tracker with a UK corporate bond tracker if they wanted both.

aroominyork

masonic said:

I believe a number of active funds can invest in government and corporate bonds, but tend not to hold much of the former, as they are perceived as a drag on returns.

For an index fund, perhaps the relatively long duration of UK government debt is off-putting. Probably better for a passive investor to combine an intermediate duration gilt tracker with a UK corporate bond tracker if they wanted both.

Yup, I should have said 'aggregate index fund'. Strategic bond funds, by definition, can invest across the govt/corporate/whenever universe.