Please stay tuned for important disclosure information at the conclusion of this episode.

Welcome to Investing Insights. I'm your host, Ivana Hampton. Active management can still win in the bond market.

Opportunities abound for active managers to best their passive peers and

benchmarks. And here's why. They have access to tools, asset classes, and flexibility that their

competition does not. Right now, the bond market is ripe for them to succeed. A deep dive into Morningstar magazine's first quarter,

2026 issue makes the case why investors should consider adding active bonds to their portfolio.

I spoke with the article's co-authors. Let's begin with Eric Jacobson, who's a senior

principal of fixed income strategies

for Morningstar. Welcome to Investing Insights, Eric. Thanks for having me. Passive investee is

pretty popular, yet you argue that the strategy comes up short and fixed income. Why do you believe active bond

managers generally win against their benchmarks, unlike active equity managers?

So it's important to say there are cases in which indexing can work well, usually with very

high quality, very generic parts of the bond market,

especially if you're getting that access at very low fees.

But there are a handful of reasons that active managers can deliver better returns

over longer time periods, especially as long as they keep those expenses in check.

And they have to have to do with things

like inefficiencies in the bond market that are out there because of concentrated ownership,

infrequent trading, with a lot of complexity. And the markets are very broad and very fragmented.

Let's talk about ownership within the bond market. Who are the investors? How often do they trade bonds

and where are they trading them? So it runs the gamut all the way from institutions down to

retail investors, but they all have very different reasons that they buy bonds. And those reasons

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