Bond funds in Singapore: How to choose for income, not just yield

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Looking for the best bond funds in Singapore?

Bond funds can offer diversified exposure to the bond market without requiring the large investment amounts that may be needed to buy individual corporate bonds.

But bond funds can differ significantly in what they invest in and the risks they take.

Some focus on shorter duration and investment grade bonds. Others invest more broadly across global markets or take more credit risk in exchange for a higher yield. There can also be significant differences in currency exposure, portfolio concentration, distributions and fees.

This means there is no single measure that tells us which bond fund is “best”.

Instead, we compare bond funds across their investment scope, duration, credit quality, yield, holdings, diversification and costs to understand where their potential returns and risks come from.

In this guide, we compare some of the bond funds available to Singapore investors and share the framework we use to assess them.

What is a bond fund?

A bond fund pools money from investors to invest in a portfolio of fixed income securities managed by a professional fund manager.

The most common bond funds invest in government and corporate bonds. Depending on its investment scope, a bond fund may also invest in loans or securitised assets.

It may invest across different countries, currencies, credit ratings and maturities.

This allows investors to gain exposure to a diversified portfolio of bonds through a single fund.

Bond funds can also make bond investing more accessible. Some SGD corporate bonds may require a minimum investment amount of S$250,000. A bond fund allows investors to gain diversified bond exposure with a much smaller investment amount.

Bond funds in Singapore compared

Here are some of the bond funds we compare.

Looking at the table, it may be tempting to simply focus on the fund with the highest yield or strongest historical return.

We think that would miss an important part of the picture.

A higher yield may reflect more credit risk. A longer duration may provide greater upside when bond yields fall, but can also result in larger price declines when yields rise.

This is why we look at the different characteristics together.

Why we would not just compare yield when selecting the best bond fund

Consider the PIMCO GIS Income Fund and the United SGD Fund.

PIMCO GIS Income Fund’s portfolio yield to maturity was about 8.37%, while United SGD Fund’s weighted average yield to maturity was 3.37%. The measures use each manager’s methodology and different reporting dates, so they are not perfectly like-for-like.

At first glance, the PIMCO GIS Income Fund offers a higher portfolio yield. However, its effective duration is about 7.36 years against the United SGD Fund’s 1.76 years.

The higher duration in PIMCO GIS Income Fund makes it more sensitive to volatile interest rate environments. As a rule of thumb, a fund with an average duration of 7 years will move approximately 7% for every 100bps change in interest rates.

In other words, the PIMCO GIS Income Fund is more volatile than the United SGD Fund.

The additional yield therefore comes at a cost as the two funds are taking different amounts of interest-rate risk.

This is why we compare yield alongside the other factors, such as duration, credit quality, and portfolio positioning, rather than picking the one with the highest yield as a standalone measure.

How to choose a bond fund in Singapore

Before comparing bond funds, we first consider what role we want bonds to play in our portfolio.

For example, are we looking for regular income, lower sensitivity to interest rate movements, or broader exposure to global bond markets?

Once that is clear, we assess a bond fund in two steps.

• Step 1: Understand what the fund is allowed to do: What can it invest in, and how much risk can it potentially take?
• Step 2: Ask five questions about the fund today: What is it investing in, and what does that mean for income and risk?

The first step tells us how the fund's risk profile could change over time, while the second tells us what risks it is taking today.

For example, two funds may currently have similar credit quality. But if one is allowed to invest much more heavily in lower rated bonds, its risk profile could change more significantly in future.

We therefore look at both before deciding whether the potential return is worth the risks involved.

Step 1: Understand what the fund is allowed to do

Before comparing a bond fund's current yield or portfolio, we first check its investment scope. 

This tells us the boundaries within which the manager can invest and how the fund's risk profile could change over time.

We look at five areas:

Step 2: Ask five questions about the fund today

Once we understand what the fund is allowed to do, we look at what it is doing today.

We use five factors to understand where the fund's potential returns are coming from and what risks investors are taking.

We then use these factors to answer five questions in more detail.

#1 How sensitive is the fund to interest rate changes?

We use duration to understand how much a bond fund may move when interest rates change.

Bond prices generally move in the opposite direction to interest rates. When interest rates rise, bond prices tend to fall, and vice versa.

As a rough guide, a fund with a duration of five years could fall by about 5% if interest rates rise by one percentage point, assuming everything else stays unchanged.

This means a longer duration fund will generally experience larger price movements when interest rates change.

Among the funds compared, LionGlobal SGD Enhanced Liquidity Fund and United SGD Fund have relatively shorter duration, while PIMCO GIS Income Fund and Schroder ISF Global Credit Income Fund have relatively longer duration.

This does not mean that shorter duration is always better. It simply tells us that the funds are taking different amounts of interest rate risk.

#2 How much credit risk is the fund taking?

Next, we look at the quality of the bonds in the portfolio.

A fund investing mainly in higher rated bonds will generally carry lower risk of issuers running into financial difficulty.

A fund with more exposure to lower rated bonds may offer a higher yield, but also takes more credit risk.

Among the funds compared, Schroder ISF Global Credit Income Fund has the highest exposure to non-investment grade bonds. But yet its average credit rating is not the lowest.

We would not rely only on the average credit rating.

Two funds can have the same average rating but very different exposure to lower rated bonds. We therefore also look at how much of the portfolio sits below investment grade.

#3 What does the fund actually own?

We also look at the underlying holdings to understand where the risks and returns are coming from.

This is because a fund invested mainly in government bonds may behave differently from one holding corporate bonds, loans or securitised assets.

For example, as of 30 September 2026, the PIMCO GIS Income Fund has a significant allocation to mortgage-backed securities, which are investments backed by pools of home loans, and can behave differently from government or corporate bonds. This means investors should understand securitised assets and the risks beyond those typically associated with traditional government bonds.

We would also look at whether the portfolio is concentrated in particular sectors, countries or issuers.

This gives us context for the duration and credit quality numbers, rather than looking at them in isolation.

#4 What is driving the fund's yield?

Yield is often one of the first numbers investors compare, but a higher yield does not come for free.

Where available, we use yield to worst, which provides an indication of the yield generated by the bonds in the portfolio after taking into account features such as bonds being repaid early.

Based on the latest data, both PIMCO GIS Income Fund and Schroder ISF Global Credit Income Fund have the highest yields. However, the yield may not have included the hedging cost for currency while the other funds’ yields are likely in SGD terms. 

The key question is not simply which fund has the highest yield, but why its yield is higher.

It may be taking more credit risk, more interest rate risk, or investing in riskier parts of the bond market.

We would therefore compare yield together with duration, credit quality and holdings.

#5 How much are you paying?

Finally, we compare fees.

Fees reduce the return investors ultimately receive, which makes them particularly relevant when comparing funds with similar portfolios and risk profiles.

If two funds offer similar exposure and take similar risks, we would generally prefer the lower cost option.

However, we would not choose a fund based on fees alone. We still need to consider what it owns, the risks it takes and the yield it offers.

How is a bond fund different from an individual bond?

One important difference is that an individual bond has a maturity date, while a bond fund generally does not.

If we buy an individual bond and hold it to maturity, its remaining maturity gradually becomes shorter. The return is also known at the point of purchase as long as we hold the bond to maturity.

Its sensitivity to interest rates therefore generally falls as it approaches maturity.

A bond fund works differently.

The fund manager continuously buys and sells bonds. This means the fund may maintain a relatively consistent duration over time.

For example, a bond fund with a duration of around five years may continue to have a duration of around five years even after we have held it for several years.

The fund can therefore remain sensitive to changes in interest rates throughout the investment period. Hence the return over the investment period is affected by changes in interest rates.

If you are new to fixed income investing, our Bond 101 guide explains how coupon rates, yields, duration and bond prices work.

Bond funds versus bond ETFs

Bond funds and bond ETFs both provide diversified exposure to bonds.

Traditional bond funds are generally bought and redeemed through fund platforms at their net asset value.

Bond ETFs trade on an exchange like shares.

Many traditional bond funds are actively managed, while many bond ETFs track an index, although actively managed bond ETFs are also available.

If you are comparing exchange traded options, read our guide to the best bond ETFs in Singapore.

How to buy bond funds in Singapore

Bond funds can be bought through banks, brokerages and investment platforms.

The same fund may sometimes be available through multiple platforms.

When comparing platforms, we would look at:

• Sales charges
• Platform fees
• Redemption fees
• Minimum investment amounts
• The share classes available
• Access to accumulating, distributing and currency hedged classes

You can learn more in our guide to the best platforms to buy mutual funds in Singapore.

What are the risks of investing in bond funds?

Bond funds are not risk free.

• Interest rate risk arises because bond prices generally fall when interest rates rise.
• Credit risk refers to the risk that an issuer is unable to meet its interest or principal payments.
• Currency risk can arise when the fund invests in bonds denominated in foreign currencies.
• There may also be liquidity risk, geographical concentration and exposure to more complex fixed income instruments depending on what the fund is allowed to invest in.

This is why a bond fund should not be treated as equivalent to cash or a fixed deposit.

What would Beansprout do? 

Within Beansprout's Four Pots framework, bond funds would generally sit within the Income Pot.

For the Income Pot, the priority is sustainable income and capital preservation, rather than simply choosing the fund with the highest yield.

We would therefore ask what is driving a fund's yield and whether the additional income adequately compensates us for the risks taken.

We first look at what the fund is allowed to do, including where it can invest, how much flexibility the manager has, and how much credit and currency risk it can take.

We then look at the portfolio today, focusing on:

• Duration, to understand interest rate risk
• Credit quality, to assess credit risk
• Holdings, to see where the risks are coming from
• Yield, to understand the income available
• Fees, to assess how much costs may reduce returns

Most importantly, we consider these factors together.

A higher yield may be attractive, but not if it comes with significantly greater risk of capital loss.

This allows us to compare bond funds based on the balance between sustainable income and capital preservation, rather than yield alone.

If you are new to fixed income investing, our Bond 101 guide explains how coupon rates, yields, duration and bond prices work.

If you prefer funds traded on an exchange, see our guide to the best bond ETFs in Singapore.

Are there other bond funds you would like us to compare? Let us know in the comments below!

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