Once again long-duration bond strategies accounted for all 10 of the top-performing domestic fixed-income strategies for the year ended March 31, according to Morningstar Inc.'s separate account/collective investment trust database.
It is the third consecutive quarter in which long duration has accounted for all of the top-10 strategies, and the fourth straight quarter in which long duration has been the highest-performing fixed-income category.
For the three- and 12-month periods ended March 31, long-duration strategies returned a median 3.25% and 14.47%, respectively, slightly below the Barclay's U.S. Long Government/Credit index's returns of 3.36% and 15.73%, respectively.
During the same periods, intermediate-duration strategies returned a median 1.62% and 5.39%, respectively; limited duration, 0.7% and 1.55%; and high yield, 2.55% and 2.09%. The median return for the full fixed-income universe was 1.61% for the quarter and 4.05% for the year. For the same periods, the Barclays U.S. Government/Credit index returned 1.84% and 5.86%, respectively.
The one-year and five-year rankings were both “very stable,” said Nicholas Sundberg, Chicago-based data analyst — separate accounts at Morningstar Inc., noting that seven out of the 10 strategies on both lists were holdovers from the previous quarter.
For the third consecutive quarter, NISA Investment Advisors LLC's 15+ STRIPS strategy ranked first, with a one-year return of 34.38%. The strategy invests in zero-coupon securities with a maturity date of 15 years or more.
Two other NISA strategies — long-duration government-only consolidated and long-duration government/credit consolidated — ranked second and seventh with one-year gross returns of 29.03% and 17.64%, respectively. All returns are gross of fees, and all returns of more than one year are compound annualized.
The STRIPS and long duration government-only consolidated strategies were also holdovers on the five-year list, returning 16.17% and 15.05%, ranking third and fourth, respectively.
Falling Treasury rates have benefited the NISA strategies, where the purpose is to manage the interest rate risk in pension liabilities.
Rounding out the top five on the one-year rankings was Hoisington Investment Management Co.'s macroeconomic fixed-income strategy, which returned 27.82% — its third quarter in the No. 3 position. Following were State Street Global Advisors' long U.S. government bond index strategy at 21.01%, and Pacific Investment Management Co.'s long-duration Treasury strategy, another holdover, at 20.92%.