Dear Investors and Friends,
Market narratives change quickly. Gold has moved higher. Bitcoin has been hammered. Technology and software stocks, which until recently appeared to move in only one direction, have fallen sharply amid growing concerns about competition and disruption from artificial intelligence. These shifts tend to command attention.
Less discussed is a far more important development: the conservative core of many portfolios has yet to recover from losses incurred more than five years ago.
A Quiet Five-Year Drawdown in Bonds
As shown in the total return chart below, the Bloomberg U.S. Aggregate Bond Index, often viewed as the S&P500 equivalent for the bond market, reached a high on August 6, 2020. As of early February 2026, it remains below that level. Even after accounting for reinvested income, the total return over this five-and-a-half-year period has been negative, approximately 1.7 percent cumulatively, or negative 31 basis points annualized.
This is not a mark to market curiosity or a theoretical exercise. It reflects the experience of the underlying bond market. Investors who accessed that exposure through broad index funds or ETFs experienced even lower returns after fees.
Five-and-a-half years later, that capital has not recovered.
The Risk That Actually Mattered
The last five years provide a powerful reminder that fixed income is not risk-free, it simply carries different risks.
Over this cycle, the dominant risk was interest-rate risk. Starting yields in 2020 were historically low, duration was extended, and convexity worked against investors as rates rose sharply beginning in mid-2020 and accelerating in 2022.
Many investors believed they were being conservative. In reality, they were heavily exposed to duration at precisely the wrong time.
This is one of the great misunderstandings in fixed income: the assumption that “safe” means stable, and that stability is guaranteed by diversification alone. In bonds, diversification does not eliminate interest-rate risk, it often embeds it.
Same Period, Very Different Outcomes
Over the exact same time period, thoughtfully constructed bond portfolios produced markedly different results.
As the chart below shows, over this same period RCM’s short duration high yield corporate bond strategy delivered approximately 8.3% annualized returns net of fees, while our investment grade municipal bond strategy generated approximately 5.3% annualized on a tax adjusted basis, also net of fees. These are the two RCM strategies that were in place as of August 2020, allowing for a clean comparison over the full period.
These outcomes were not the result of interest rate predictions or market timing. They reflected deliberate control of duration, disciplined asset allocation, thoughtful security selection, and portfolio construction focused on absolute client objectives rather than index composition.
High yield felt scary. Interest-rate risk did not. And yet interest-rate risk is what caused the most damage.
Why Indexing Works Differently in Bonds
In equities, indexing often reduces risk by broadening exposure. In fixed income, indexing can unintentionally create risk and reduce performance.
The defining advantage of owning a bond is its stated maturity and the pull to par that comes with it. Time is an ally. As maturity approaches, price volatility declines and principal becomes increasingly certain. When investors own bond funds or bond indices, they give up that benefit. There is no maturity date and no pull to par. Bonds are sold and replaced before they mature, which permanently embeds interest rate risk and removes one of the most powerful protections fixed income can offer.
In fixed income, how a portfolio is built matters far more than the label attached to it.
A Different Way to Think About Bonds
At RCM we do not manage bond funds. Instead, we build separately managed portfolios of individual bonds, measured against appropriate benchmarks, and designed to meet specific client needs, whether capital preservation, income generation, liquidity, or tax efficiency.
That structure allows us to explicitly manage risk across dimensions that matter in fixed income, including interest rate risk, liquidity risk, reinvestment risk, default risk, and complexity risk, and to align portfolios with real world objectives rather than benchmark relative outcomes.
The lesson of the last five years is not that bonds are broken. It is that understanding risk matters, especially in the part of the portfolio designed to protect capital.
With gratitude,
David and Mike
Disclaimer
Roosevelt Capital Management LLC is a registered investment adviser. The information presented is for educational purposes only and is not intended to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein.
Past performance is not indicative of future performance. Principal value and investment return will fluctuate. No guarantees or assurances that the target returns will be achieved, or objectives will be met are implied. Future returns may differ significantly from past returns due to many different factors. Investments involve risk and the possibility of loss of principal.
While all the values used in this report were obtained from sources believed to be reliable, all calculations that underly numbers shown in this report believed to be accurate, and all assumptions made in this report believed to be reasonable, Roosevelt Capital Management LLC neither represents nor warrants the values, calculations or assumptions and encourages each prospective investor to conduct their own review of the audits, values, calculations and assumptions.