8 Top-Performing Short-Term Bond Funds

For investors worried that their bond portfolios may be too sensitive to interest rate increases, short-term bond funds can help reduce this risk, since shorter-term bonds fall less when rates rise. This means investors with longer-term bonds may be exposed to more volatility than they’re comfortable with.

Investors looking to add short-term bonds to their portfolios should review these eight funds, all of which have high-conviction

. To screen for the top-performing funds in this category, we looked for those with the best returns over the last one-, three-, and five-year periods. All names that passed the screen are .

• Calvert Short Duration Income Fund CDSRX
• FPA New Income Fund FPNIX
• Guggenheim Limited Duration Fund GIKRX
• JPMorgan Limited Duration Bond ETF JPLD
• Neuberger Short Duration Income ETF NBSD
• PGIM Short Duration Multi-Sector Bond Fund SDMQX
• Victory Short Term Bond Fund URSBX
• VictoryShares Short-Term Bond ETF USTB

Short-Term Bond Fund Performance

Short-term bond portfolios invest primarily in corporate and other investment-grade US fixed-income issues and typically have durations of 1.0-3.5 years. These portfolios are attractive to fairly conservative investors, because they are less sensitive to interest rates than portfolios with longer durations. Morningstar calculates monthly breakpoints using the effective duration of the Morningstar US Core Bond Index. “Short term” is defined as 25%-75% of the three-year average effective duration of the index.

Over the past 12 months, the average fund in the short-term bond category returned 4.78%. On an annualized basis, these funds have climbed 5.13% over the past three years and 2.35% over the past five. Meanwhile, the Core Bond Index has risen 4.91% over the past 12 months, 3.65% per year over the past three years, and 0.34% per year over the past five years.

Screening for the Top-Performing Short-Term Bond Funds

We looked at returns from the past one, three, and five years using Morningstar Direct. We screened for open-end and exchange-traded funds in the top 33% of the category using their lowest-cost primary share classes for those periods. We also filtered for funds with Morningstar Medalist Ratings of Bronze, Silver, or Gold. We excluded funds with assets under $100 million and analyst coverage that was not 100%. This left eight names.

Because the screen was created with the lowest-cost share class for each fund, some may be listed with share classes that are not accessible to individual investors outside of retirement plans, or they may be aimed at institutional investors and require large minimum investments. The individual investor versions of those funds may carry higher fees, reducing returns to shareholders. Medalist Ratings may differ among the share classes of a fund.

Calvert Short Duration Income Fund

• Morningstar Medalist Rating
  : Bronze
• Morningstar Rating
  : ★★★★★

Over the past year, the Eaton Vance fund rose 5.18%, while the average fund in its category rose 4.78%. The fund, launched in February 2019, has climbed 6.07% over the past three years and 3.16% over the past five.

The fund’s environmental, social, and governance mandate may raise questions but proves less restrictive in practice. While ESG analysis might theoretically narrow the investment field, the impact is primarily visible in the fund’s avoidance of energy holdings. The fund’s opportunity set remains quite wide, encompassing numerous sectors where ESG analysis is less clear-cut and thus less restrictive, such as Treasuries, mortgages, and asset-backed securities. The process has been executed well, demonstrating thoughtful risk-taking without a cavalier attitude toward capital impairment.

The fund’s investment process remains otherwise consistent. The strategy takes on more credit risk compared with most short-term bond category peers, with corporate and non-government-related securitized credit making up around 75% of the portfolio. This approach may lead to occasional underperformance, but it is not inherently faulty. The team employs a mix of bottom-up fundamental analysis and top-down asset allocation to an opportunity set screened for favorable sustainability characteristics.

Credit for execution goes to Vishal Khanduja and Brian Ellis, who have been at the helm since their arrivals in early 2013 and late 2015, respectively. The fixed-income group, fully integrated across the former Calvert, Eaton Vance, and Morgan Stanley teams since late 2023, now leverages extensive global resources. The bank-loan and high-yield research teams continue to be favorably regarded by Morningstar analysts covering their respective offerings.

As of Feb. 28, 2025, the fund’s performance has been solid, with returns for all standard trailing time periods landing in the top quintile of its distinct category peers. However, it’s important to note that these returns have been achieved with above peer-norm realized volatility. While short-term, sharp downturns like the covid crisis have occasionally resulted in deeper drawdowns, the fund’s maximum drawdown over longer periods has remained close to the category median. The fund’s credit-biased approach has led to a performance record that aligns with expectations, but potential investors should be aware of the increased volatility.

FPA New Income Fund

• Morningstar Medalist Rating
  : Silver
• Morningstar Rating
  : ★★★★★

The $11.1 billion fund has gained 5.53% over the past year, while the average fund in its category is up 4.78%. The FPA fund, launched in July 1984, has climbed 5.88% over the past three years and 3.35% over the past five.

Regardless of its leanings at a particular time, the portfolio almost always holds an eclectic mix of bonds that may look risky on the surface but have underlying safeguards or collateral features that make them safer and more predictable than they appear. Portfolio manager Abhijeet Patwardhan won’t buy anything without robust issue-by-issue research, and everything must pass extreme stress-testing while still offering significant value. That has extended to its deeply discounted agency-backed mortgages with very stable prepayment speeds, for example, while the asset-backed securities sleeve includes a more diverse mix of insurance-premium receivables, mortgage servicer advance payments, and rental-car financing, among others.

That stress-testing dovetails with a simple element of the fund’s process: Identify the longest-duration bonds expected to produce at least a breakeven return over 12 months, assuming the bond’s yield will increase by 100 basis points during that stretch. The other side of that goal, however, is to make sure the bond performs well if yields fall, as well. That means, for example, avoiding holdings whose refinancing risk stunts returns during a falling rate rally.

Combined with low market rates, the strategy’s risk test kept its duration short for a long time. After 2022, the Federal Reserve hikes pushed up yields across the maturity spectrum, though, and Patwardhan has been inching up duration ever since. It stood at 3.4 years at the end of March 2025, the longest it has been in more than 20 years.

That’s at the long end for a short-term fund but still modest relative to the broader market. That kind of caution has protected investors from major downdrafts, including during the severe 2022 selloff, which has pushed its long-term returns well past most of its distinct Morningstar Category peers. As of mid-2025, its returns for all standard trailing periods and since Patwardhan was named a comanager in 2015, all placed in the category’s best quartile.

Guggenheim Limited Duration Fund

• Morningstar Medalist Rating
  : Silver
• Morningstar Rating
  : ★★★★

The $5.8 billion fund has climbed 5.09% over the past year, outperforming the average fund in its category, which rose 4.78%. The Guggenheim fund, launched in March 2019, has climbed 5.82% over the past three years and 3.16% over the past five.

Former CIO Scott Minerd, who passed away in 2022, developed the approach. It’s a distinctive framework that draws on lessons from behavioral finance to decentralize decision-making among groups focused on macro research, sector research, portfolio construction, and portfolio management. Each group uses a deliberate, slowed-down process to avoid mistakes. This fund and its siblings have very strong records, including over the more than three years since Minerd’s passing.

Credit the fund’s four managers, who coordinate their roles in service of Minerd’s framework. Firm CIO Anne Walsh and fixed-income CIO Steven Brown inherited the framework and now oversee it while comanagers Adam Bloch and Evan Serdensky handle much of the day-to-day work. They incorporate the decisions of the macro, sector, and portfolio construction groups, and the entire effort is amply staffed with a vast group of managers and researchers across security types and sectors.

This broader team’s goal of exploiting inefficiencies among out-of-benchmark bonds shows in the portfolio. Historically, it has meant a large, eclectic sleeve of securitized fare. In late 2015, the fund had more than 70% in a mix of midquality collateralized loan obligations, nonagency mortgages, and commercial mortgage-backed securities. After bringing that exposure down and up over the following years, the team cut risk in 2018 and 2019, leaving the fund lagging during the latter. That saved the portfolio from worse damage during the 2020 coronavirus-driven selloff, though, and the team quickly pivoted back, adding risk before the market bounced back. The team has made other pivots in recent years, including a shift into agency mortgages and Treasuries in 2023 as the US Federal Reserve raised rates and both sectors began offering more income. That mix got as high as 46.0% in mid-2025 before they slashed the Treasury stake, given signs of economic strength, leaving the portfolio with only 2.3% in Treasuries and 24.0% in agency mortgages at the end of 2025.

Choices within the latter were the main detractor from performance when the fund finished the year around the middle of the (distinct funds) short-term bond category. Its successes in nearly every year other than 2019—when caution held it back—have given the fund an excellent long-term record of top-quartile returns over Walsh’s tenure since the end of 2013, including every standard trailing period of three years or longer.

JPMorgan Limited Duration Bond ETF

• Morningstar Medalist Rating
  : Gold
• Morningstar Rating
  : ★★★★

The $3.7 billion fund has gained 5.07% over the past year, while the average fund in its category is up 4.78%. The JPMorgan fund, launched in February 1993, has climbed 5.70% over the past three years and 3.12% over the past five.

Sais, the lead manager on the strategy since 1995, announced his April 2026 retirement a year in advance, providing time to facilitate a smooth transition to Cary Fitzgerald and securitized specialist Sajjad Hussain. The firm named Fitzgerald as a comanager on the ETF on April 1, 2025, and had added Hussain as a comanager in November 2024. The decision to cede the reins to this duo makes sense given the portfolio’s securitized debt focus. Fitzgerald comes with solid credentials as JP Morgan’s head of short duration; he joined the firm in 2000. Hussain has limited management experience, yet his understanding of securitized markets runs deep, as the former head of the firm’s securitized research team. This pair should be able to get up to speed with the help of Sais and comanager Bob Manning, who’s been on the strategy since 2013 and has more than 25 years of industry experience.

Disciplined security selection and stable interest-rate sensitivity are the ETF’s key features, which result in lower volatility than most peers. The strategy avoids Treasuries, which make up 70% of the Bloomberg 1-3 Year US Government/Credit Index. Instead, the portfolio favors various types of securitized debt designed to offer an attractive yield and a stable duration profile, limiting extension in rising rate periods. Macro themes guide broad positioning, while diligent bottom-up security selection drives portfolio construction. Nonagency mortgage-backed securities, commercial mortgage-backed securities, asset-backed securities, and collateralized loan obligations (40%-80% of assets) and agency MBS and collateralized mortgage obligations (25%-50%) constitute the bulk of the portfolio, while investment-grade credit plays a supporting role (0%-15%). Duration, a measure of the portfolio’s level of interest rate risk, has stayed between 1.2 and 2.0 years regardless of the index’s duration, and is frequently shorter than the average peer’s 2.2 years.

This mix has produced a higher-yielding, higher-quality portfolio versus peers that more prominently feature corporate bonds—38.5% of assets on average versus the ETF’s 7.2% as of June 2025. Moreover, the portfolio’s 72.2% in AAA rated debt was higher than the average peer’s 26.0%.

The strategy has delivered compelling long-term results. Over the trailing 15 years, the ETF’s 2.7% annualized return through August 2025 beat its unique short-term bond Morningstar Category’s median 2.3% and the index’s 1.6%. This top-quartile result was even better when adjusting for risk; its Sharpe ratio was second best among 90 category rivals with track records as long. While the ETF has held up in periods when credit spreads widened, its shorter duration may cause it to lag when long-term yields fall.

Neuberger Short Duration Income ETF

• Morningstar Medalist Rating
  : Bronze
• Morningstar Rating
  : ★★★★

The $956.3 million fund has climbed 5.20% over the past year, outperforming the average fund in its category, which rose 4.78%. The Neuberger Berman fund, launched in June 2010, has climbed 6.10% over the past three years and 3.03% over the past five.

Neuberger Berman Short Duration Income ETF is an attractive option for short-term bond investors in search of extra yield.

Converted from a legacy mutual fund in June 2024, this offering is part of Neuberger Berman’s foray into active fixed-income exchange-traded funds. Though the mutual fund’s record extends nearly four decades, the team has managed it in its current form since a 2019 mandate tweak. In the time thereafter, the strategy has consistently been among the highest-yielding funds in the short-term bond Morningstar Category. This is by design. The managers prioritize generating attractive income levels and do so largely by allocating across short-dated corporate and securitized credit depending on relative value opportunities.

The firm’s established multisector expertise inspires confidence, but this team’s short-term portfolio management expertise is equally important. Lead manager and Neuberger Berman veteran Michael Foster is chiefly responsible for the day-to-day management of this ETF. Named on this strategy since 2010, Foster has managed short-term mandates since 2003 and has spent nearly his entire three-decade career at the firm. He works closely with comanager and fellow short-term expert Matthew McGinnis, who has been named on the strategy since 2017. The duo collaborates with Chief Investment Officer Ashok Bhatia, Co-Head of Investment-Grade Credit David Brown, and a slew of other multisector and sector-specialist managers.

The strategy’s strong income generation has driven a compelling relative performance profile both before and after its 2024 conversion into an ETF, especially for investors willing to stomach some extra volatility. Indeed, the strategy’s 2.91% annualized return between August 2019 and July 2025 edged more than 75% of distinct short-term bond category peers. Still, the managers will have to prove themselves over a longer period with respect to navigating the liquidity challenges associated with ETFs, particularly given some of their allocations to less liquid tranches of securitized credit.

PGIM Short Duration Multi-Sector Bond Fund

• Morningstar Medalist Rating
  : Gold
• Morningstar Rating
  : ★★★★

Over the past year, the PGIM fund rose 5.18%, while the average fund in its category rose 4.78%. The fund, launched in December 2013, has climbed 6.16% over the past three years and 2.99% over the past five.

PGIM Short Duration Multi-Sector Bond takes a flexible approach that relies on strong fundamental research and a robust risk-management infrastructure. Offered through a long-standing mutual fund and a newer exchange-traded fund, the strategy remains an attractive option for short-term bond investors willing to tolerate episodic volatility in exchange for higher income.

The firm’s multisector portfolio management team shepherds the strategy. That includes, but is not limited to, a trio of industry veterans in Gregory Peters, Richard Piccirillo, and Robert Tipp. Each named to the mutual fund since its first full year in 2014, the managers offer distinct areas of expertise spanning credit, securitized debt, and global rates. Together, with supporting multisector portfolio-construction experts, they set risk targets for multisector portfolios like this one within the confines of the strategy’s 250-basis-point tracking error budget relative to its Bloomberg US Government/Credit 1-3 Year Index. Among those involved in day-to-day portfolio construction are comanagers Matthew Angelucci and Tyler Thorn, both of whom were named to the fund in September 2023 amid the departures of two experienced managers. Meanwhile, the multisector team draws on standout sector-specialist teams across the firm’s fixed-income platform for bottom-up security ideas that fit their desired risk allocations.

The team’s tight handle on risk management inspires confidence. That’s important not only due to the strategy’s relatively risky and complex opportunity set but also given the group’s penchant for derivatives as critical risk-management tools. Through heavy use of futures and swaps, multisector managers regularly hedge out interest rate risk from longer-dated debt to maintain a short-duration profile, an approach that could spell trouble if not conducted with the necessary precision. This strategy stands out among its short-term bond Morningstar Category peers in large part due to its expanded opportunity set. It will often embrace credit risk compared with its more circumspect peers (the November 2025 portfolio’s 16% stake in below-investment grade and nonrated debt dwarfed its median peer’s 3%) while also maintaining a healthy portion of high-quality securitized debt.

That combination has proven to be a winning one across market cycles. The mutual fund’s Z shares’ Sharpe ratio, a measure of volatility-adjusted returns, ranked in the top quartile of distinct peers over the trailing three-, five-, and 10-year periods through December 2025.

Victory Short Term Bond Fund

• Morningstar Medalist Rating
  : Silver
• Morningstar Rating
  : ★★★★★

The $2.7 billion fund has climbed 5.12% over the past year, outperforming the average fund in its category, which rose 4.78%. The Victory Capital fund, launched in December 2016, has climbed 6.18% over the past three years and 3.51% over the past five.

Long-standing tenures and close collaboration define this strategy’s management team. Manager Brian Smith has led the strategy since 2013 and works alongside comanagers Douglas Rollwitz, Jim Jackson, Kurt Daum, and Neal Graves, whose long tenures at Victory Capital, many of them prior to the 2019 USAA acquisition, have fostered strong teamwork over time. Longtime manager John Spear, the firm’s co-CIO, retired in December 2024 after gradually stepping back from daily responsibilities. The firm prepared for this transition well in advance by naming Jackson co-CIO in 2023.

The managers emphasize bottom-up security selection, seek incremental yield, and nimbly adjust allocations across securitized debt, corporate bonds, and Treasuries based on relative value opportunities. For example, as the managers saw asset-backed spreads widen in recent years, they steadily raised the allocation, which reached 28% of assets as of June 2025, more than 10 percentage points higher than pre-2020 levels.

The team applies a thoughtful risk framework in spread risk, which protects the strategy on the downside. The portfolio leans more heavily on lower-rated investment-grade debt compared with the peer median, but the managers counterbalance that tilt by holding up to 20% in Treasuries when spreads look tight, maintaining a 1% issuer limit for corporate bonds, and limiting securitized debt rated BBB or lower to about 5% of assets. They avoid large interest rate bets by keeping the portfolio’s duration close to that of the Bloomberg 1–3 Year Credit Index’s 1.8 years.

The results back up the process. Since Smith’s first full month in December 2013, the fund’s 2.8% annualized gain through August 2025 ranked near the category’s top decile. While the strategy takes on more risk than most peers because of its heavier credit exposure, it has shown resilience during stress periods and rewarded investors with strong long-term absolute and risk-adjusted results.

VictoryShares Short-Term Bond ETF

• Morningstar Medalist Rating
  : Bronze
• Morningstar Rating
  : ★★★★★

Over the past year, the Victory Capital fund rose 5.12%, while the average fund in its category rose 4.78%. The fund, launched in October 2017, has climbed 6.16% over the past three years and 3.49% over the past five.

Long-standing tenures and close collaboration stand out for this exchange-traded fund’s management team. Manager Brian Smith has led the strategy since its 2017 inception but has managed sibling Victory Short-Term Bond since 2013. He now works alongside comanagers Douglas Rollwitz, Jim Jackson, Kurt Daum, and Neal Graves, whose long tenures at Victory Capital, many of them prior to the 2019 USAA acquisition, have fostered strong teamwork over time. Longtime manager John Spear, the firm’s co-CIO, retired in December 2024 after gradually stepping back from daily responsibilities. The firm prepared for this transition well in advance by naming Jackson co-CIO in 2023. A sizable, stable, and experienced supporting team, with many analysts having spent nearly two decades at Victory, work closely with the managers.

The team applies a thoughtful framework to manage spread risk, which protects the strategy on the downside. The portfolio leans more heavily on lower-rated investment-grade debt compared with the peer median, but the managers counterbalance that tilt by holding up to 20% in Treasuries when spreads look tight, maintaining a 1% issuer limit for corporate bonds, and limiting securitized debt rated BBB and lower to about 5% of assets. They avoid large interest rate bets by keeping the portfolio’s duration close to that of the Bloomberg 1–3 Year Credit Index’s 1.8 years.

The results back up the process. Since Smith’s first full month in November 2017, the ETF’s 3.4% annualized gain through August 2025 ranked in the category’s top decile. While the strategy takes on more risk than most peers because of its heavier credit exposure, it has shown resilience during stress periods and rewarded investors with strong long-term absolute and risk-adjusted results.