Key Takeaways
- Each of the 10 largest active bond funds beat their category averages in 2025, while six of the 10 largest bond index funds outperformed.
- PIMCO Total Return Fund and PIMCO Income Fund held the highest category rankings among the largest active bond funds for their 2025 returns.
- Vanguard Intermediate-Term Bond ETF ranked highest among the largest bond index funds for its performance in the the intermediate core bond category
It was a strong year for the largest actively managed bond funds. Each topped the average fund in their categories, while six of the 10 biggest bond index funds outperformed the competition.
Two strategies from PIMCO led the pack. In first place among the largest active bond funds was the $47 billion PIMCO Total Return Fund PTTRX. The fund’s 9.3% return placed it in the top 1.0% of the intermediate core plus bond fund category, giving it the highest category ranking among the largest active bond funds. Second place went to the $213 billion PIMCO Income Fund PIMIX, whose 11% return put it in the 4th percentile of the multisector bond fund category.
Reflecting the robust showing among the largest active bond funds, even the worst-performing name on the list, the $88 billion Strategic Advisers Fidelity Core Income Fund FIWGX, landed in the 38th percentile of the intermediate core plus bond fund category with a 7.6% return.
Returns on the largest index funds were more of a mixed bag, with only six of the 10 outperforming their peers. Funds from Vanguard, which runs six of the 10 largest bond index funds, took both the top and bottom spots when measured against their category peers. Highest ranked was the $50.1 billion Vanguard Intermediate-Term Bond ETF BIV, which returned 8.6% for the year, putting it in the 2nd percentile of the intermediate core bond fund category. The worst performer against its category was the $134 billion Vanguard Total International Bond II Index Fund VTILX, which returned 3%, leaving it in the 87th percentile of the global bond-USD hedged category.
“Bond funds were able to generate strong returns in 2025, in many cases posting performance above historical averages,” says Dominic Pappalardo, chief multi-asset strategist for Morningstar Wealth. Interest-rate-sensitive funds benefitted from the Federal Reserve’s rate cuts. Meanwhile, Pappalardo says corporate bonds posted strong performances. “Funds that had allocations to corporate bonds were able to deliver higher returns than those that only held government bonds,” he explains. “Corporate bonds as an asset class outperformed government bonds of a similar maturity by over 1.2 percentage points. The same is true for mortgage-backed securities, which outperformed similar Treasuries by 1.6 points.”
Evaluating the Performance of the Largest Bond Funds
Each quarter, we review the short- and long-term performances of the largest active bond funds and index-tracking funds. Many of these funds, such as the Vanguard Total Bond Market Index Fund, are core holdings in portfolios, especially retirement accounts. This list includes both traditional mutual funds and exchange-traded funds. When evaluating funds, investors should focus on long-term returns across multiple years and market cycles. However, short-term returns can provide valuable information about biases within strategies.
Performance data for this article was based on the lowest-cost share class for each fund. Some funds may be listed with share classes not accessible to individual investors outside retirement plans. The individual investor versions of those funds may carry higher fees, reducing returns to shareholders. For longer-term returns, if a share class was launched more recently than the period mentioned, an older share class was substituted if one exists.
The Largest Active Bond Funds: The Best 2025 Performers
Managers of the largest active bond funds had a very strong 2025, with all 10 outperforming their category averages. Three made it into the top 10% of their categories, with another three in the top 20%. This is a significant improvement over 2024, when four of the largest funds underperformed their categories, one made it to the top quintile, and none landed in the top 10%.
The PIMCO Income Fund, which carries a Morningstar Medalist Rating of Gold, had the highest overall return for 2025 at 11.0%, well ahead of the 7.7% return on the average multisector bond fund, as well as the 7.2% return of the Morningstar US Core Plus Bond Index.
The best-performing fund relative to its category was the Gold-rated PIMCO Total Return Fund, which ranked in the top percentile of funds in its category. It returned 9.3% in 2025, outperforming the 7.3% return on the average fund in the core-plus category and the 7.2% return of the US Core Plus Index.
The fund’s performance this year came as manager Mark Kiesel, PIMCO’s chief investment officer, abruptly retired in November. This didn’t diminish Morningstar’s view of the fund. “PIMCO Total Return and PIMCO Total Return ESG remain in good hands despite the unexpected departure,” wrote Morningstar principal Brian Moriarity.
Also in the top decile of its category was the Gold-rated $104 billion Dodge & Cox Income Fund DOXIX, which returned 8.5% in 2025, putting it in the 6th percentile of the intermediate core-plus category. Morningstar senior principal Mara Dobrescu describes the fund as “consistently impressive.”
The Largest Active Bond Funds: The Worst 2025 Performers
In a testament to these funds’ strong performance in 2025, the Gold-rated Strategic Advisers Fidelity Core Income Fund’s 7.6% return gave it the lowest percentile rank in its category of the 10, but it still outperformed its peers.
The Fidelity fund closed the year on a slightly weaker note, ranking in the 53rd percentile of its category in the fourth quarter. It was the only one of the 10 to underperform its peers for the quarter.
The Largest Bond Index Funds: The Worst 2025 Performers
2025 was less rosy for investors in the largest bond index funds, with six of these funds outperforming their peers.
The worst performer was the Vanguard Total International Bond Fund. The Silver-rated fund returned 3% for the year—both the lowest absolute return on the list and the lowest relative to its peers, putting it in the 87th percentile of the global bond-USD hedged category. Funds in the category averaged a 5.0% return in 2025, while the benchmark Morningstar Global Core Bond Index returned 4.8% for the year.
The second-worst performer was the $68.6 billion iShares 0-3 Month Treasury Bond ETF SGOV, which returned 4.2% for the year, putting it in the 82nd percentile of the ultrashort bond category. Funds in the category averaged 4.8% for the year, while the benchmark Bloomberg 1-3 Year Gov/Credit Index returned 5.0%.
The Largest Bond Index Funds: The Best 2025 Performers
The two standouts among the largest index funds were both Vanguard strategies. The highest-ranking fund was the Gold-rated Vanguard Intermediate-Term Bond ETF, which returned 8.6% for the year, placing it in the 2nd percentile of intermediate core funds. Funds in the category averaged a 7.1% return, as did the Morningstar US Core Bond Index.
The second-best performer was the Gold-rated $61 billion Vanguard Intermediate-Term Corporate Bond ETF VCIT. The fund’s 9.4% return put it in the 5th percentile of the US corporate bond category. The benchmark Morningstar US Corporate Bond Index returned to 7.6% in 2025, while funds in the category averaged 7.7%. “The fund remains a precise tool for investors targeting high-quality, intermediate-term corporate bonds,” wrote Morningstar analyst Lan Anh Tran. “Its low fee should preserve its performance edge over the long run.”
Longer-Term Performance of the Largest Active Bond Funds
Over the past three years, all but two of the largest active bond funds outperformed their category averages. The $99 billion American Funds Bond Fund of America RBFGX did the worst, with its 4.7% annualized return leaving it in the 56th percentile of the intermediate core bond category. The second-worst performer was the Strategic Advisers Fidelity Core Income Fund. Its 5.4% annualized return placed it in the 53rd percentile of the intermediate core-plus category.
Two names tied for the title of best-performing fund over the past three years: the $52 billion PGIM Total Return Bond Fund PTRQX and Dodge & Cox Income Fund. Both averaged a 6.2% return, which put them in the 14th percentile of the intermediate core-plus bond category.
Longer-Term Performance of the Largest Bond Index Funds
Over the past three years, only three of the largest bond index funds outperformed their category peers. The top performer was the Vanguard Intermediate-Term Corp Bond ETF, which returned 7.2% per year over the last three years, putting it in the 3rd percentile of the US corporate bond category. The Vanguard Intermediate-Term Bond ETF ranked in the 13th percentile of the corporate bond category with a 5.4% annualized return. Finally, the $64 billion Vanguard Short-Term Inflation-Protected Securities ETF VTIP returned 5.2%, putting it in the 23rd percentile of the short-term inflation-protected bond category.