Most fixed income conversations spend a lot of time on what to own (e.g. credit quality, duration, sector exposure) and not nearly enough time on how the portfolio is put together. But structure matters… a lot. Over a full cycle, the way you organize maturities can quietly drive outcomes just as much as the bonds themselves. When looking at the three most common structures, if you look at the data, one of them has consistently done a better job of delivering durable results over the long term.
To that end, we structure all our fixed income strategies as “actively laddered” for a few reasons:
To illustrate our thesis, we pulled Bloomberg municipal bond indexes with annual return periods from 1997-2025, and structure data from 2011-2025 (all represent the total data available). The representative indexes we chose:
(We adjusted the total returns of the Barbell and Bullet indexes to normalize the option adjusted durations (OAD) to the Laddered index.)
The Barbell
The laddered index vs. the Barbell-constructed index:
Source: Bloomberg, City Different Investments
The Barbell structure invests at the extremes of the available investment universe; the Ladder invests across the entire available investment universe.
The graph below shows the annual return differences between the two structures (and the total cumulative return differences) for the periods from 1994-2025.
Source: Bloomberg, City Different Investments
The laddered structure does not outperform in every period… but it does outperform 59% of the time (and added 6.74% relative cumulative total return over the period).
The Bullet
The Laddered index vs. the Bullet-constructed index:
Source: Bloomberg, City Different Investments
The Bullet construction concentrates its investments around specific maturities, while the Laddered structure is more evenly distributed along the available investment universe e.g. “don’t put all your eggs in one basket”.
The graph below shows the annual return differences between the two structures (and the total cumulative total return differences for the periods) from 1994-2024.
Source: Bloomberg, City Different Investments
We’ll leave you with one thought: The performance data we cited above can be thought of as a “success ratio”. If you were a baseball player and batted between .590 and .660, you’d be the greatest hitter to have ever played the game by a wide margin... that’s double the batting averages of some Hall of Fame players:
Given the Ladder’s success rate… feels like a Hall of Fame shoe-in to us.
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