Why This Fidelity Bond ETF Has Outperformed Over the Long Term
The Fidelity Total Bond ETF has done well in recent years as managers adjust to changing tides.


The Federal Reserve has begun to lower interest rates, so it's a good time to check in with the Fidelity Total Bond ETF (FBND), an actively managed bond exchange-traded fund (ETF) in the Kiplinger ETF 20. The fund beat the Bloomberg U.S. Aggregate Bond Index over the past 12 months with a 12.5% return.
"We outperformed the benchmark by about one percentage point, which is our goal," says Ford O'Neil, who leads the fund with Celso Munoz and four co-managers. The fund has outdone the Agg over the past three and five years, too.
Like most intermediate-term, high-quality bond funds, Fidelity Total Bond owns a mix of U.S. government debt, corporate bonds, and mortgage-backed or asset-backed securities. But the managers' tilts in those sectors have made all the difference.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Over the past year, for instance, the managers favored medium-maturity government debt over short- or long-term bonds. They also leaned into high-yield debt (IOUs rated double-B to triple-C) and emerging-markets bonds, which have performed well in recent months, says O'Neil.
The fund can invest up to 20% of assets in lower-quality debt securities. In the investment-grade (rated triple-A to triple-B) corporate-bond arena, O'Neil says the managers emphasized financial IOUs, in particular securities issued by big money-center banks such as JPMorgan Chase, Deutsche Bank and Barclays.
"The regulatory environment is still strong" in the banking sector, which helps to buoy credit quality, says O'Neil.
He and his cohorts don't expect a recession in the coming year, but they have been "reducing risk," says O'Neil. In particular, they're cautious about corporate bonds, given the sector's recent strong performance. "There's not a lot of opportunity there," he says. So the managers have been modestly paring back the fund's corporate-debt holdings and adding to Treasuries, which, says O'Neil, will “allow us to be nimble” and snap up securities in other sectors when opportunities (or volatility) arise.
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
Related content
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Nellie joined Kiplinger in August 2011 after a seven-year stint in Hong Kong. There, she worked for the Wall Street Journal Asia, where as lifestyle editor, she launched and edited Scene Asia, an online guide to food, wine, entertainment and the arts in Asia. Prior to that, she was an editor at Weekend Journal, the Friday lifestyle section of the Wall Street Journal Asia. Kiplinger isn't Nellie's first foray into personal finance: She has also worked at SmartMoney (rising from fact-checker to senior writer), and she was a senior editor at Money.
-
S&P 500 Extends Losing Streak Ahead of Powell Speech: Stock Market Today
Stocks continued to struggle ahead of Fed Chair Powell's Friday morning speech at Jackson Hole.
-
A Timeline of Warren Buffett's Life and Berkshire Hathaway
Buffett was the face of Berkshire Hathaway for 60 years. Here's a timeline of how he built the sprawling holding company and its outperforming equity portfolio.
-
What Will Powell Say In His Jackson Hole Speech?
Fed Chair Jerome Powell will likely walk a fine line in his Friday morning speech at the Jackson Hole symposium, but Wall Street is hoping for rate-cut clues.
-
Fall Is Tax Time? Yes! Act Now to Make Needed Adjustments
Review your withholdings, contribute to tax-saving HSA and FSA accounts, manage a bonus' impact and adjust for major life events such as weddings and job changes.
-
Board Service in Retirement: The Best Time to Join a Board Is Before You Retire
Many senior executives wait until retirement to take a seat on a corporate board. But making this career move early is a win-win for you and your current organization.
-
Tech Sells Off While Trump Stirs the Fed: Stock Market Today
We've reached another important part of earnings season, though markets remain captivated by the president, the Fed, and interest rate policy.
-
A Financial Professional's Take on Long-Term Care Insurance: Buy or Not?
Unless you have about $6,000 burning a hole in your pocket every month, you should make a plan in case you need long-term care. Luckily, you have options.
-
How to Unearth Sustainable Investment in Mining: A Financial Professional's Guide
Mining is likely to play a critical role in the global transition to more environmentally friendly energy resources. Here's how you can balance the opportunities and the risks.