AVIG takes an active approach to core bond investing, using fundamental research to overweight sectors and securities with better risk-adjusted return potential. Unlike passive aggregate bond funds, it aims to beat the benchmark through selective credit exposure and duration management.
How It Works
The fund starts with the Bloomberg U.S. Aggregate Bond Index universe but actively deviates based on Avantis's credit research and rate views. It dynamically adjusts duration positioning, typically ranging from 80-120% of the index duration, while overweighting investment-grade corporates and mortgage-backed securities when spreads are attractive. The portfolio maintains broad diversification across Treasury, corporate, and securitized sectors.
Key Features
- Active duration management allows tactical positioning for rate environments without extreme bets
- Systematic credit research process targets bonds trading cheap to fundamentals, not just yield chasing
- Lower cost than most active bond funds at similar expense ratios to enhanced index strategies
Risks
- Active bets could underperform the aggregate index by 1-2% annually if credit or duration calls go wrong
- 3.71% yield suggests moderate duration risk — expect 4-6% losses if rates rise 100 basis points
- Credit overweights could hurt in recessions when corporate spreads widen 200+ basis points
Who Should Own This
Best for investors who want core bond exposure but believe modest active management can add value over passive aggregate funds. Works as a complete bond allocation for moderate portfolios or as a complement to Treasury funds for those wanting some credit exposure. The active approach makes most sense for taxable accounts where the research-driven trading doesn't trigger tax headaches.