So most bond managers accept the premise that you win by not losing. More to the point, bond fund managers are less concerned about how well your money is doing and are generally driven by the performance numbers on which their bonuses hinge. From that point of view, few investment organizations demand a positive return from their bond fund manager before considering bonuses. The performance numbers are measured by independent companies who assemble data and produce results comparing all the fund managers over different time periods. Performance data is broken down into four quartiles, with the point between the second and third quartile called the median.
Every manager wants to be in the second quartile or higher.
They want to be there consistently and, if possible, beat the ScotiaMcLeod Bond Universe at the same time. Surprisingly, it is not as difficult as you might imagine. No one really knows where interest rates are going. Inevitably, their luck runs out, implying that past performance is not the best indicator of future performance. With that in mind, it is possible to achieve consistent above-average performance in all types of markets through a passive portfolio management approach that, unfortunately, few managers utilize.