Bogle: Pimco Shows Why Active Funds Don’t Work

Bogle: Pimco Shows Why Active Funds Don’t Work via CNBC

In the latest salvo of a surprisingly public debate between two of the biggest names in fund management, Bogle said the underperformance of Pimco’s flagship Total Return mutual fund provides a timely reminder that for most investors, index funds are the way to go.


“They all peak at different times. They peak and they go down,” Bogle, speaking about individual active-fund performance, said in a interview. “Pimco has been pretty good, but they also have reverted to the mean.”

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Bogle spoke a few days after Pimco’s James Moore issued a report titled, “Sorry, Mr. Bogle, But I Respectfully Disagree. Strongly.” That was in response to unspecified comments Bogle reportedly had made disparaging active management not only for equity—stock-centered—funds but also for bonds.

In his commentary, Moore insisted that active management was particularly important in fixed income, where investors often have different goals and the playing field has different dynamics than in equity investing. The critical passage, which entailed five ways bond investors can benefit from active management:

The variety of investor objectives other than maximizing total return; the mechanics of bond index construction; the importance of the new issue market for bonds; the predominance of over-the-counter transactions; and the highly skewed returns on individual bonds versus stocks.

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