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I had several TRP bond funds (High Yield, Intl. Bond, Emerging Mkt, and Core Income). I was thinking of a Multisector Bond fund which would cover all the above. That way it is easy to manage and I can get one bond fund which covers all bond classes.
My thinking was Loomis Sayles Bond (LSBRX). Any thoughts? or suggestions?
I'm a big fan of funds that have a good degree of flexibility, and of LSBDX/LSBRX in particular. And it does give you diversification over corporate, junk, preferreds, and international in one package.
That said, realize that it is still somewhat limited in its flexibility. Except for Canadian dollars, it may not invest more than 20% internationally. That means that (a) its emerging market exposure is quite small, and (b) its overall international exposure (because it's heavily concentrated in just one foreign currency - the loonie) is more a bet against the dollar than a bet in favor of particular currencies.
So, while I like your idea, this fund may not be quite the all-in-one package you're looking for, and you might still have to augment with other funds. But all you might need to do is shift the "center" of your portfolio. From there you could rely upon Fuss and Gaffney to deal with the allocations relative to that "neutral" position. That gets you pretty close to your objective of simplifying.
Unfortunately, the cheaper institutional shares (LSBDX) are no longer available for less than $100K - at least I haven't found a way in at a lower min. And at 92 basis points, LSBRX is a bit pricey. On the positive side, it has a low turnover rate (22%), as constrasted with some of the newfangled unconstrained bond funds managed by PIMCO (e.g. Harbor Unconstrained - HAUBX) that turn over nearly their whole portfolio monthly (1000%+ annual rate).
Finally, it's worth noting that Fuss said (in the M* article linked to in another thread, regarding a rising interest rate environment): "Well, actually, it's a wonderful environment. .... For my first 23 years of [managing bonds], it was wonderful. Every time you reinvested, you were reinvesting at higher rates. The value of the issuer's call option, you could laugh at it." He's moving more into convertibles and other bonds that benefit from rising equity values. That's what you want a fund to do - use its flexibility to take advantage of changing markets.
It's hard to know what to suggest with the info provided.
What do you want bonds to do in your portfolio? Are they most of your portfolio, and you want them to provide quite a bit of juice, like less risky stocks? Or do you have stocks too and want bonds to act at least partly as a hedge, limiting portfolio losses when stocks tank? What are your percentages of the four classes of bonds you mention in the post, do they match up with the LSBRX bond sector allocations, and is that what you want?
For most investors, with at least some stocks, LSBRX as a single bond fund in a portfolio may not be the best idea, because it's relatively risky for a bond fund, and it moves in the same general direction as stocks. In that case, if you like LSBRX, it'd probably be better to at least pair it with a somewhat safer intermediate bond fund, say DoubleLine Core (DBLFX), Baird Core Plus (BCOIX), Pimco Total Return (PTTRX or the ETF BOND), TCW Core (TGCFX), MetWest Total Return (MWTRX), or one of a number of other good funds of that sort.
You might try out several funds on the M* chart pages, like this one for LSBRX, to see how they fare and how much they can lose or gain in certain periods:
LSBRX typically performs somewhere between US investment grade bonds and equities, which is to be expected as it is a mix of investment grade, high yield and convertibles (having attributes of both bonds and stocks) and foreign bonds (off in their own world, literally). That's what you get when you mix these classes. As I wrote above, if you don't like the weightings, one can adjust by augmenting. That's what you're suggesting here (augmenting toward more traditional bonds), and what tgeno is suggesting above (augmenting toward EM bonds).
Specifically, performance figures (from M*, can't seem to get a link to this generated table):
The performance is often 50-60% of the way toward equity (as represented here by Vanguard total Stock Market Index Fund), so if one want sto shift that closer to investment grade bonds, one could add a fund such as one of the ones you suggested. It is worth noting that while the 2008 performance tracked equities about 65%, the follow up year, 2009, the fund outperformed both stocks and bonds, suggesting that the tracking wasn't nearly as close to stocks as one might think (stocks lost over those two years combined, LSBRX didn't) - rather this fund chooses its own allocations and often goes its own way.
I don't think there is one fund that covers all the bases (even two that cover all the bases), so I would consider TGBAX and LSBRX together. Yeah, Loomis can be volatile (bad, bad 2008), but it also bounces back quickly (2009,2010). With Templeton in a lot of EM bonds, and Loomis in just about everything else, you would have a pretty decent overall allocation.
lsbrx is a great choice for intermediate/long term. I do own it. I would recommended 50s% etfs/index funds [i.e. bnd] and 50% in active bond funds . good luck
How about DBLTX? I understand that it is too focussed on MBS, but during the short time of its existence (less than 3 years) money invested there have grown up by 33%, and it provided an incredibly smooth ride, with limited interest rates sensitivity, which is why its assets have grown up to $25 billion. Even if it does not cover all types of bonds, can it be a substantial part of bond portfolio, at least in present environment?
We recently sold our position in TEGBX due to market reactions (downside) that began to set a similar pattern to the downside in 2011. Perhaps this fund will rotate to the more positive side for the remainder of the year; but our house remains perplexed by the total absence of U.S. Treasury holdings in a fund named Global Bond.
As to a bond mix; we have sprinkles everywhere, and will continue to diversify the diversification among holdings and management styles/choices, as every management group will not "get it right" all of the time:
---High Yield/High Income Bond funds FAGIX Fid Capital & Income SPHIX Fid High Income FHIIX.LW Fed High Income DIHYX TransAmerica HY
---Total Bond funds FTBFX Fid Total PTTRX Pimco Total
---Investment Grade Bonds ACITX Amer. Cent. TIPS Bond DGCIX Delaware Corp. Bd FBNDX Fid Invest Grade FINPX Fidelity TIPS Bond OPBYX Oppenheimer Core Bond
I have linked details on INCMX for you and others to review. Although I do not own this fund I check its holdings from time-to-time since it is a fund of funds to see how it has been positioned. Perhaps it might be of some interest.
Reply to @catch22: "our house remains perplexed by the total absence of U.S. Treasury holdings in a fund named Global Bond. "
What's in a name? that which we call a rose by any other name would smell as sweet. Romeo and Juliet, Act II, Scene II. (I had to memorize this for a course in Shakespearean acting, but I digress.)
I likewise remain perplexed by funds named "Total Bond" (FTBFX, PTTRX) that contain neither junk bonds (unlike core "plus" funds), nor inflation-protected bonds. Not to mention foreign bonds (I don't see "domestic" or US in the name either).
The bottom line is that one needs to (a) read the prospectus to see what the fund is allowed to invest in, and (b) look at the annual reports to see what subset of that the fund is actually investing in.
Of course, you are totally correct with your assessment about what is in a name. And whatever is in a fund recipe, must be discovered via the prospectus.
We have been around long enough to know that person "x's" recipe falling under the generic name of "chili"; is likely to neither have the look or taste of another's; or what one may be accustomed.
FIDO's FTBFX April 30 holdings indicate 12.5% of high yield from two holdings. I have not checked PTTRX.
Reply to @msf: PTTRX is Pimco Total Return Fund (oddly, doesn't even have the word "bond" in the name), and while Billy the G. is very heavy in Treasuries (including some TIPS) and mortgages these days, he's also got small percentages in (and essentially always has some stake in) U.S. investment grade corps, U.S. high yield, foreign developed, and emerging markets, with the odd muni bond thrown in too. I've always thought it useful to consider PTTRX as mildly core-plus, or something along those lines.
For anybody who's interested, PTTRX holdings are put up monthly via this page: http://investments.pimco.com/Products/pages/346.aspx Click "portfolio statistics" in the middle column under "core documents." All the Pimco bond funds put out monthly allocation reports via that site.
Good posts above, by the way, about Loomis. My attempt on that, sketchy as it was, was mainly to recommend thinking about Lsbrx & other choices in terms of the whole portfolio.
Of course Catch and Andy are correct that the total bond funds contain some junk and TIPS. I fell into the same trap of relying upon what I "knew" the fund would have without checking. The amounts are under the 20% that most funds have to go outside their mandates, but still, those bonds are in their portfolios. Mea culpa.
Reply to @msf: Thanks for your posts on this thread, msf. Pimco TR has a headache-inducing set of prospectus limits, and even though I've owned it or one of its clones, and now the ETF, for several years, I can never remember them for more than 5 minutes after each reading. The bullets go like this:
* At least 65% in "diversified fixed income, which may be represented by forwards or derivatives ...." Yeah, it's definitely Pimco. * Duration within plus or minus 2 years of the Barcap U.S. Aggregate. * Up to 10% high yield. * Up to 30% in foreign currencies, and "beyond that limit in U.S. $-denominated securities of foreign issuers." No stated limit on the latter. * Up to 15% in securities "tied to" emerging markets. (What does THAT mean?) * Up to 10% total in preferreds & convertibles.
And, ominously, derivatives without limit.
I wonder if even Gross can remember all the wrinkles in the prospectus.
Oh, and lest we forget, there are also a Pimco TR II, III, and IV.
Reply to @AndyJ: I rather like simplicity in bond funds. Pimco TR is too complex and I do not like its derivative exposure. I understand they need derivative exposure as the fund has too much assets to invest comfortably otherwise.
The ETF, BOND is probably better as it has more direct bond exposure instead of derivatives. The ETF is not really a replica of the Mutual Fund.
Reply to @Investor: Right, the ETF isn't a replica, primarily on the derivative front. The stated asset allocation, though, is pretty similar as of 5-31. I switched half of my PTTRX to BOND, and may move the rest, but as of last month, the dividend yield is still considerably higher in the OEF, so I've delayed doing the complete switch for a while longer.
The OEF derivative exposure gives me pause, too, but knowing that the fund did well in the '08 crash softens it a bit for me.
Comments
http://www.investmentnews.com/article/20120411/FREE/120419981#
Good luck,
Archaic
That said, realize that it is still somewhat limited in its flexibility. Except for Canadian dollars, it may not invest more than 20% internationally. That means that (a) its emerging market exposure is quite small, and (b) its overall international exposure (because it's heavily concentrated in just one foreign currency - the loonie) is more a bet against the dollar than a bet in favor of particular currencies.
So, while I like your idea, this fund may not be quite the all-in-one package you're looking for, and you might still have to augment with other funds. But all you might need to do is shift the "center" of your portfolio. From there you could rely upon Fuss and Gaffney to deal with the allocations relative to that "neutral" position. That gets you pretty close to your objective of simplifying.
Unfortunately, the cheaper institutional shares (LSBDX) are no longer available for less than $100K - at least I haven't found a way in at a lower min. And at 92 basis points, LSBRX is a bit pricey. On the positive side, it has a low turnover rate (22%), as constrasted with some of the newfangled unconstrained bond funds managed by PIMCO (e.g. Harbor Unconstrained - HAUBX) that turn over nearly their whole portfolio monthly (1000%+ annual rate).
Finally, it's worth noting that Fuss said (in the M* article linked to in another thread, regarding a rising interest rate environment): "Well, actually, it's a wonderful environment. .... For my first 23 years of [managing bonds], it was wonderful. Every time you reinvested, you were reinvesting at higher rates. The value of the issuer's call option, you could laugh at it." He's moving more into convertibles and other bonds that benefit from rising equity values. That's what you want a fund to do - use its flexibility to take advantage of changing markets.
It's hard to know what to suggest with the info provided.
What do you want bonds to do in your portfolio? Are they most of your portfolio, and you want them to provide quite a bit of juice, like less risky stocks? Or do you have stocks too and want bonds to act at least partly as a hedge, limiting portfolio losses when stocks tank? What are your percentages of the four classes of bonds you mention in the post, do they match up with the LSBRX bond sector allocations, and is that what you want?
For most investors, with at least some stocks, LSBRX as a single bond fund in a portfolio may not be the best idea, because it's relatively risky for a bond fund, and it moves in the same general direction as stocks. In that case, if you like LSBRX, it'd probably be better to at least pair it with a somewhat safer intermediate bond fund, say DoubleLine Core (DBLFX), Baird Core Plus (BCOIX), Pimco Total Return (PTTRX or the ETF BOND), TCW Core (TGCFX), MetWest Total Return (MWTRX), or one of a number of other good funds of that sort.
You might try out several funds on the M* chart pages, like this one for LSBRX, to see how they fare and how much they can lose or gain in certain periods:
http://quote.morningstar.com/fund/chart.aspx?t=LSBRX®ion=USA&culture=en-us
Good luck, AJ
Specifically, performance figures (from M*, can't seem to get a link to this generated table): The performance is often 50-60% of the way toward equity (as represented here by Vanguard total Stock Market Index Fund), so if one want sto shift that closer to investment grade bonds, one could add a fund such as one of the ones you suggested. It is worth noting that while the 2008 performance tracked equities about 65%, the follow up year, 2009, the fund outperformed both stocks and bonds, suggesting that the tracking wasn't nearly as close to stocks as one might think (stocks lost over those two years combined, LSBRX didn't) - rather this fund chooses its own allocations and often goes its own way.
good luck
The below current holdings for the funds indicated, clickable specific links are within each fund ticker type.
Loomis Sayles MultiSector Bond funds
We recently sold our position in TEGBX due to market reactions (downside) that began to set a similar pattern to the downside in 2011. Perhaps this fund will rotate to the more positive side for the remainder of the year; but our house remains perplexed by the total absence of U.S. Treasury holdings in a fund named Global Bond.
As to a bond mix; we have sprinkles everywhere, and will continue to diversify the diversification among holdings and management styles/choices, as every management group will not "get it right" all of the time:
---High Yield/High Income Bond funds
FAGIX Fid Capital & Income
SPHIX Fid High Income
FHIIX.LW Fed High Income
DIHYX TransAmerica HY
---Total Bond funds
FTBFX Fid Total
PTTRX Pimco Total
---Investment Grade Bonds
ACITX Amer. Cent. TIPS Bond
DGCIX Delaware Corp. Bd
FBNDX Fid Invest Grade
FINPX Fidelity TIPS Bond
OPBYX Oppenheimer Core Bond
---Global/Diversified Bonds
FSICX Fid Strategic Income
FNMIX Fid New Markets
DPFFX Delaware Diversified
LSBDX Loomis Sayles
PLDDX Pimco Low Duration (domestic/foreign)
---Speciality Funds (sectors or mixed allocation)
FRIFX Fidelity Real Estate Income (bond/equity mix)
Regards,
Catch
I have linked details on INCMX for you and others to review. Although I do not own this fund I check its holdings from time-to-time since it is a fund of funds to see how it has been positioned. Perhaps it might be of some interest.
http://www.upgraderfunds.com/fundx-flexible-income-fund-incmx
Good Investing,
Skeeter
What's in a name? that which we call a rose by any other name would smell as sweet.
Romeo and Juliet, Act II, Scene II.
(I had to memorize this for a course in Shakespearean acting, but I digress.)
I likewise remain perplexed by funds named "Total Bond" (FTBFX, PTTRX) that contain neither junk bonds (unlike core "plus" funds), nor inflation-protected bonds. Not to mention foreign bonds (I don't see "domestic" or US in the name either).
The bottom line is that one needs to (a) read the prospectus to see what the fund is allowed to invest in, and (b) look at the annual reports to see what subset of that the fund is actually investing in.
Of course, you are totally correct with your assessment about what is in a name. And whatever is in a fund recipe, must be discovered via the prospectus.
We have been around long enough to know that person "x's" recipe falling under the generic name of "chili"; is likely to neither have the look or taste of another's; or what one may be accustomed.
FIDO's FTBFX April 30 holdings indicate 12.5% of high yield from two holdings.
I have not checked PTTRX.
Take care of you and yours,
Catch
For anybody who's interested, PTTRX holdings are put up monthly via this page:
http://investments.pimco.com/Products/pages/346.aspx
Click "portfolio statistics" in the middle column under "core documents." All the Pimco bond funds put out monthly allocation reports via that site.
Good posts above, by the way, about Loomis. My attempt on that, sketchy as it was, was mainly to recommend thinking about Lsbrx & other choices in terms of the whole portfolio.
* At least 65% in "diversified fixed income, which may be represented by forwards or derivatives ...." Yeah, it's definitely Pimco.
* Duration within plus or minus 2 years of the Barcap U.S. Aggregate.
* Up to 10% high yield.
* Up to 30% in foreign currencies, and "beyond that limit in U.S. $-denominated securities of foreign issuers." No stated limit on the latter.
* Up to 15% in securities "tied to" emerging markets. (What does THAT mean?)
* Up to 10% total in preferreds & convertibles.
And, ominously, derivatives without limit.
I wonder if even Gross can remember all the wrinkles in the prospectus.
Oh, and lest we forget, there are also a Pimco TR II, III, and IV.
The ETF, BOND is probably better as it has more direct bond exposure instead of derivatives. The ETF is not really a replica of the Mutual Fund.
The OEF derivative exposure gives me pause, too, but knowing that the fund did well in the '08 crash softens it a bit for me.