Find out how your portfolios stack up
Expert Perspective
|August 20, 2025
Find out how your portfolios stack up
How do your portfolios stack up against your peers'? Learn what’s trending in the semiannual report from Vanguard’s Portfolio Analytics and Consulting (PA&C) team. You can review the highlights of the mid-year 2025 report here or download the full analysis.
Advisors’ management style preferences vary by asset class
As we move through 2025, advisor portfolios continue to reflect a nuanced approach in using active and passive management across asset classes. This mid-year update to Advisor portfolio construction trends and insights explores these patterns in detail, offering a snapshot of how advisors engaging with our service are positioning portfolios in today’s market environment.
Within equities, we observe a strong advisor preference for passive management. After reviewing 958 equity sleeves through the first half of the year, one in four portfolios is entirely passive, with the median passive equity allocation just under 70% (see Figure 1).
Conversely, we see a strong preference for active management within advisor fixed income allocations. After reviewing 1,082 unique fixed income sleeves through the first half of the year, one in four portfolios is entirely active, with the median active fixed income allocation at 80% (see Figure 1).
Figure 1: Active fund preferences
Advisors prefer passive for equities, favor active for fixed income
Sources: Vanguard and Morningstar, Inc., as of June 30, 2025.
Note: At mid-year 2025, 958 equity sleeves were observed, with an average of 10 tickers per sleeve. At mid-year 2025, 1,082 fixed income sleeves were observed, with an average of five tickers per sleeve. Equity and fixed income charts include all observed portfolios in the time period. Active fund preferences exclude individual stock positions.
From our conversations, advisor rationale in choosing between active and passive management varies. Allocators routinely cite “efficient” equity markets as the primary driver behind their passive equity preference. Familiarity—or a lack thereof—with fixed income markets is often provided as the driver behind fixed income management preferences, where advisors commonly outsource their fixed income allocation decisions to active bond managers.
Vanguard believes in the merits of both active and passive investing and maintains that a sound framework that considers investment goals, risk tolerance, cost, and discipline should guide an investor’s decision between active and passive management. Doing so can strengthen conviction in an investment plan while increasing the odds of investment success.
Management preferences influence fixed income exposures
Bond market volatility was top of mind for advisors during the first half of 2025, evidenced by advisors sharing 1,082 fixed income sleeves with our team for analysis—a 17% increase in observed bond allocations compared with mid-year 2024.
Given advisor preferences for active management within fixed income, our mid-year update offers readers additional context by looking at exposures in portfolios marked as “high active” or “low active.” To define these categories, we have ranked all observed fixed income allocations by their level of active management, with the top half of observations labeled as high active, and the bottom half labeled as low active.
In the case of duration, management preferences show a marginal impact, where high active portfolios have a median duration of 4.9 years, and low active fixed income portfolios hold a slightly longer median duration of 5.1 years. Interestingly, exposures were more pronounced when examining below-investment-grade bond allocations. The allocation to below-investment-grade bonds in high active portfolios was more than double the allocation within low active portfolios (see Figure 2).
Figure 2: Below investment grade
Below-investment-grade allocations remain elevated
Sources: Vanguard and Morningstar, Inc., as of June 30, 2025.
Note: At mid-year 2024, 922 fixed income sleeves were observed, with an average of 5 tickers per sleeve. At mid-year 2025, 1,082 fixed income sleeves were observed, with an average of five tickers per sleeve. Fixed income charts include all observed portfolios in each time period. Fixed income benchmark: Bloomberg U.S. Aggregate Float-Adjusted Index.
Management preferences had the most pronounced impact on portfolios when looking at fixed income sector exposures. For high active portfolios, the median allocation to government bonds was 21.8%, however, in low active portfolios this allocation increased to 37.5%—a difference of 15.7% (see Figure 3). Much of this difference is offset by allocations to securitized bonds, where we observed a median allocation of 36.4% for high active portfolios, compared with 24.9% for low active portfolios.
Figure 3: Taxable fixed income sectors
Advisors overweight cash, corporate credit, and securitized; underweight government bonds
Sources: Vanguard and Morningstar, Inc., as of June 30, 2025.
Note: At mid-year 2025, 1,082 fixed income sleeves were observed, with an average of five tickers per sleeve. Fixed income charts include all observed portfolios in the time period. Fixed income benchmark: Bloomberg U.S. Aggregate Float-Adjusted Index. High-active fixed income portfolios represent the top half of observed portfolios by percentage of active management use. Low-active fixed income portfolios represent the bottom half of observed portfolios by percentage of active management use.
With tight credit spreads and attractive yields available to investors in investment-grade bonds, it is important to revisit the role that fixed income serves within a multiasset portfolio. Many advisor conversations this year have centered around identifying sources of risk within their fixed income portfolios and repositioning their allocations for today’s market environment.
Consider these next steps
Whether you want additional insights on management style selection or consultation on specific portfolio construction questions, our Portfolio Solutions team’s expertise and vast suite of analytical tools can help you fine-tune your approach.
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Notes:
- Past performance is no guarantee of future results.
- All investing is subject to risk, including possible loss of principal.
- Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account. There is no guarantee that any particular asset allocation or mix of funds will meet your investment objectives or provide you with a given level of income. Diversification does not ensure a profit or protect against a loss.
- Investments in bonds are subject to interest rate, credit, and inflation risk.
- High-yield bonds typically have medium to lower credit quality ratings, which makes them more susceptible to credit risk compared to bonds with higher credit quality ratings.
- CFA® is a registered trademark owned by CFA Institute.
Download this detailed report on the portfolio construction choices your fellow advisors made in the first half of 2025. Use it to inform your decisions as you work to improve outcomes for your clients.
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