The 5 best performing fixed income funds of 2024 (and what they have in common)

2024 was a complex year for the fixed income universe. 

Government bond yields rose over concerns that global economic growth would slow and inflation might bounce back faster and higher than previously expected. The Australian 3-year yield touched 4.2% in November while longer-dated bond yields overseas have sold off in even more dramatic fashion. 

In credit land, spreads for investment-grade assets tightened again even though many experts were saying that spreads were already historically tight (and therefore, not necessarily a great investment opportunity in aggregate.) Returns in this space continued to average a full percentage point above government bonds. 

Even 2025 has started with a bang! 

The term premium, that is, the extra yield investors demand for lending long into the future, is at a 10-year high. And although the RBA is set to deliver at least one or two cuts this year, Bank of America strategists are arguing the Federal Reserve may not cut interest rates at all in 2025. All this creates a fascinating setup for bonds heading into the new year - and with it, a big question over whether bonds can continue to be the robust portfolio diversifier they traditionally have been.

In the following wire, part of our ongoing series evaluating the performance of the world's top fund managers, we find out which fixed income fund managers topped the class in calendar 2024. 

As the difference in the two tables show, the top performers over the last year are not necessarily the ones that stay at the top of their game over the long term.

How we compiled the list

The following list was compiled using the information in Livewire's Find Funds feature.

• In the “Fund type” box, select “Managed Funds”
• In “Asset Class”, select “Fixed Income - Australia and Fixed Income - Global”
• We then sorted the results based on 1-year returns.

Note: Fund performance is also typically viewed over longer timeframes than one year (i.e. three-year and five-year rolling periods).

The table below simply captures the best-performing fixed-income funds for the past 12 months. All data is supplied by Morningstar. If you would like to conduct your own research into top-performing funds, you can do so by clicking here.

The top five performers in CY24

Name	1-Year Perf	3-Year Perf	5-Year Perf	Since Inception
Ares Diversified Credit Fund	10.54%	7.34%		7.48%
KKR Global Credit Opportunities (AUD) A	10.5%			9.62%
Realm Strategic Income Fund	10.49%	8.72%		7.63%
Realm High Income - Wholesale Units	10.06%	6.88%	5.71%	5.12%
Manning Monthly Income Fund	9.71%	8.65%	7.65%	7.09%

Source: Morningstar. This list of funds is not, nor is it intended to be, a set of recommendations. Please do your own research and seek advice from a professional before making any investment decisions of your own. Past performance is not a reliable indicator of future returns.

Insight #1: Is past performance an indicator of future performance?

Not if this list is anything to go by! If you compare the 2025 list to the 2024 list, only two of the five funds from last year's top five have retained their spots. Last year's top place getter has dropped to 15th on the list while the second place getter has risen to become this year's top performer: the Ares Diversified Credit Fund. 

By firm, there are two new entrants to this list - the KKR Global Credit Opportunities (AUD) A and the Manning Monthly Income Fund. We've interviewed the managers of both of these funds numerous times on the platform and you can see some examples of their work below:

KKR:

Private Assets

Why it's critical investors understand why opportunities present themselves

View

Manning:

Fixed Income

How investors can access 9% yields in this asset class

View

At least all five of this year's top-performing funds are specialists in the fixed income universe - which speaks to the art of doing one thing and doing it well!

Insight #2: ...But the reliable outperformers continue to outperform

Managers or advisers often talk about how important it is to pick a fund run by a consistently high performing investor. And while that's true of most asset classes, it's particularly true in the fixed income space. In the time I've been writing these top performing funds pieces, the top fund managers in the fixed income asset class has practically never changed. 

That is, the global managers remain prominent (PIMCO, Ares, KKR and/or T. Rowe Price). There are also generally two or three local boutiques (e.g. Fortlake, Realm and/or Yarra) and one of the Metrics funds usually makes an appearance.

The fact that Manning Asset Management's flagship retail fund makes an appearance in this Top 5 list is, in itself, a rare breakthrough. 

Insight #3: If left in the right hands, complex investing is a good thing

The other thing that comes through in this list is that all these funds invest in complex products (i.e. these funds don't simply invest in garden variety bonds.) For instance, the Ares Diversified Credit Fund specialises in direct lending, syndicated loans, and CLO assets. In fact, the only thing close to 'regular' bonds you'll find in this fund is a small allocation toward high yield bonds. 

The KKR product has a much higher allocation to high yield bonds but it also features a large allocation toward bank loans. High yield investments outperformed in the latter half of the year amid receding growth concerns, benign earnings, and further macro visibility following the US election results.

Meanwhile, both the Realm and Manning-run products invest in RMBS (residential mortgage backed security) and ABS (asset-backed security) products. That means both of these products will watch the housing market and, in particular, the state of mortgage arrears.