Fidelity Investments’ Inflation- Protected Bond Fund is lagging behind its biggest competitor, Vanguard Group, after losses in subprime mortgages, this year’s worst-performing debt market, Bloomberg reports.
The Fidelity fund advanced at an annual rate of 5.6 percent during the past five years, compared with the 6 percent return of the $10.2 billion Vanguard fund, data compiled by Bloomberg show.
Fidelity’s fund has disappointed investors as defaults on home loans to people with limited credit rose to the highest in a decade. The ABX-HE-BBB-06-1 index, tied to mortgage-backed bonds with the lowest investment-grade ratings, fell more than 60 percent this year, according to London-based Markit Group Inc.
“Someone who’s investing in lower-quality securities to help performance, even to a limited extent like the Fidelity fund, is taking a chance,” says Paul Herbert, an analyst at Chicago-based research firm Morningstar Inc.