Oakmark is the mutual fund family launched in 1991 by Harris Associates, the Chicago deep-value firm founded in 1976 (about $105bn AUM). Bill Nygren runs the flagship Oakmark Fund and David Herro the Oakmark International Fund, buying businesses at large discounts to intrinsic value and holding them like owners — publishing quarterly fund commentaries, market commentaries and insight articles.
This report warns you not to buy individual bonds yourself, even when high yields look tempting. The risk is real: companies can default (fail to pay back), and historically you only recover 40% on average. A single default can wipe out years of gains. Bond prices also swing wildly with interest rate changes, and if you need to sell early, you could lose principal. The smarter move is to use bond funds (like mutual funds or ETFs). Professional managers spread risk across hundreds of bonds, do deep credit analysis, and manage inflation risk. For most people, active management beats DIY.
Oakmark's 4Q23 report discusses the value of active management in fixed income investing. The core argument is that while purchasing bonds individually may appear attractive in the current high-interest-rate environment (retail investors hold approximately 20% of U.S. corporate bonds), this strategy
This chapter discusses the current trend of retail investors being encouraged by media and financial commentators to directly purchase individual bonds in a high-interest-rate environment. The report argues that this seemingly straightforward strategy overlooks key risks and complexities in fixed-income investing and demonstrates the value of professional active management in bond investments.
The author explicitly opposes retail investors buying individual bonds directly in the current environment, arguing that bond funds (including mutual funds and ETFs) are a wiser choice. Counterintuitive judgment: The high coupons brought by high interest rates appear tempting but are precisely a "yield-chasing" trap, easily leading investors to overlook default risk.