Loading...
 

The funds in this category span a broad spectrum from the likes of the religiously driven Ave Maria Bond (AVEFX) to the more traditional Fidelity Total Bond Fund (FTBFX). The duration of debt instruments being purchased varies greatly from fund to fund, allowing investors to manage their exposure to interest-rate fluctuations if they so choose. For example, so-called ultrashort funds, such as AMF Ultra Short Fund (AULTX), focus on bonds with durations slightly higher than securities residing in money market funds. Investors can also choose short-term bond funds, like Hartford Short Duration A (HSDAX), as well as intermediate bond funds, such as USAA Intermediate-Term Bond Fund (USIBX), that invest in fixed-income securities with maturities in between short-term bond funds and the type of debt that a long-term bond fund, such as Vanguard Long-Term Bond Index Fund (VBLTX), would own. 

Many funds in this group are meant to be core fixed-income holdings, such as JPMorgan Core Bond Fund A (PGBOX). These more-diversified funds can act as an investor’s sole bond holding with exposure to multiple bond categories and, usually, bonds across the duration spectrum.

The group even contains funds with a focus on reducing taxation, such as PIMCO Unconstrained Tax Managed Bond A (ATMAX). Of course there are index offerings within the group, like T. Rowe Price US Bond Index Fund (PBDIX) or Vanguard Total Bond Market Index Fund (VBTLX).

The Diversified Bond objective group has been a below-average performer relative to the broader bond market over the long term, as measured by the Barclays Aggregate Bond Index.  For the 10-year period ended July 31, 2012, the group had an annualized return of 4.8%, while the Index reported an annualized return of 5.6%. For five years and three years, the group had gains of 5.2% and 7.5%, respectively, while the Index reported gains of 6.8% and 6.9%, respectively. Over the trailing 12-month period through July 31, 2012, the Diversified Bond group reported a return of 5.0%, compared with 7.3% for the Barclays Aggregate Bond Index. The group has an average Risk Rank of 3, indicating that funds in this group might appeal to many investors looking to limit risk. That said, investors with a long investment horizon might also want to invest in common equities, a group more likely to outpace inflation. 

A fund with a very good year-to-date return is PIMCO Income Fund A (PONAX). This fund seeks maximum current income. Long-term capital appreciation is a secondary objective. To achieve this objective, the fund invests at least 65% of its assets in a multi-sector portfolio of fixed-income instruments of varying maturities, including bonds, debt securities, and similar instruments issued by various U.S. and non-U.S. public and private sector entities. It may use options, futures contracts, or swap agreements as part of its investment strategy. The average portfolio duration normally varies from two to eight years based on its forecasts for interest rates.

Management may invest up to 50% of total assets in high-yield securities rated below investment grade. As of July 31, 2012, the fund held about 24% of its assets in corporate debt, 15% in government debt, 58% in securitized debt, 1% in U.S. municipal debt, and 2% in cash and equivalents.

Another fund with a solid year-to-date return is Templeton Global Total Return Fund A (TGTRX). This fund seeks to provide total return, consisting of a combination of interest income, capital appreciation, and currency gains.

To achieve this objective, the fund invests at least 80% of its assets in fixed- and floating- rate debt securities and debt obligations, including convertible bonds, of governments, government-related, or corporate issuers worldwide. The fund may also invest in securities or structured products that are linked to, or derive their value from, another security, asset, or currency of any nation. Also, management must be invested in issuers located in at least three countries, including the U.S. It may also invest a substantial portion of its assets in developing markets. By investing in foreign markets, the fund can potentially offer an attractive level of income, since many foreign bond markets are offering higher yields than U.S. markets. As of June 30, 2012, the fund had 28% of its assets invested in Asia/Pacific, 19% in the Americas, 44% in Europe/Africa, 1% in other countries, and 8% in cash.


A third fund with a good year-to-date return is Oppenheimer Global Strategic Income Fund A (OPSIX). This fund’s objective is high current income. To achieve this objective, the fund normally invests its assets in three sectors: foreign governments and issuers, U.S. government securities, and lower-grade, high-yield securities of U.S. and foreign issuers, known as “junk bonds”.

At times, the amounts of its assets in each of the three sectors will vary. It can invest up to 100% of its assets in any one sector at any time. It also has no limitations regarding the range of maturities of the debt securities it can buy or the market capitalization of the issuers of those securities. The fund may also use derivatives for investment purposes and to hedge its bond positions and currency exposure
As of August 28, 2012, the fund’s portfolio is allocated as follows: 37% in corporate bonds & notes; 43% in government debt; 19% in securitized debt; and the 1% balance in cash equivalent and other.  

In the table below, we have listed 10 top-performing funds through July 31, 2012 from our Fund Advisor database.

10 Top Diversified Bond Funds Performance

 

Fund Name

Ticker

% Year-to-date

Total Return

% 1-Month

Total

Return

% 3-

Month

Total

Return

% 6-Month

Total

Return

% 5-Year

Total

Return

Annualized

PIMCO Income A

PONAX

11.11

2.46

4.21

8.33

10.38

  

PIMCO Investment Grade Corp A

  

PBDAX

10.03

2.52

4.57

6.78

10.71

Nuveen High Inc. B

FJSBX

9.44

1.90

1.07

5.58

5.61

  

Thrivent Diversified Income Plus A

AAHYX

9.88

1.99

2.47

6.25

5.43

PIMCO Diversified Income A

PDVAX

9.53

2.45

3.72

6.52

9.11

Templeton Global Total Return A

TGTRX

9.51

2.88

1.39

3.94

 

Northern Multi-Mgr High Yield Opportunity

NMHYX

9.36

1.65

1.99

5.61

 

MorganStanley Flexible Income A

DINAX

8.67

2.39

2.04

4.79

5.72

Manning & Napier High Yield Bond

MNHYX

8.43

1.77

2.09

5.16

 

Oppenheimer Global Strategic Income A

OPSIX

8.19

2.17

2.45

5.70

5.78

Diversified Bond Objective Group

  

5.11

1.51

1.84

3.24

5.17