RPSIX. Since I'm pretty well married to T Rowe, it looks like one of the best among a less than fabulous menu of bond funds. Even holds about 10% equities. Monthly divs which look at least a little better than my PRSNX--- which I will keep, and grow. My only other (Trad.) IRA bond fund is TRP HY, TUHYX. Junk bonds are not where I'd prefer to be, but I'm not betting the farm on it. Is RPSIX worth throwing money into it? I've been window-shopping up and down that T Rowe bond lineup more than a few times...
Comments
It is what it is - a conglomeration of many different types of income producing funds - ranging in quality from government bonds to junk and EM. I’d say it’s a good long-term repository for funds on which you want to earn better than money market rates - and don’t have any other use for.
You likely won’t find it rated very high at M* and the others. But I don’t know how you can put the fund into any “category”. It’s unique to T. Rowe - dependent on the success of the roughly 15 different T. Rowe Price funds that comprise it. I’ve always held it. It represents about 15% of my overall allocation. But unlike some, I do not consider it a substitute for cash or short term-bonds.
As you mention, the exposure to PRFDX makes it somewhat vulnerable to equity moves. They can allocate up to 25% to that fund. But 15% is the highest I can remember. RPSIX is having an uncharacteristically poor year. I don’t expect that to persist into the future (but could be wrong). Over the longer term I’d expect the fund to average maybe 2-4% above what a money market fund will net - with decent downside protection against an equity sell off. Bond risk? Because it’s so widely diversified it shouldn’t be as susceptible to a hit from rising rates as many other types of bond funds - Just MHO.
Yes, I’ll agree with you that bonds are not Price’s strong point. There’s better bond managers. On the other hand, they do understand allocation strategies very well (but are often too early in their calls).
@Crash - The fund report (available on their website) will have a chart (near the back) showing both the “target” and “current” percentages to all the funds it holds. If you don’t care for most of those funds, you shouldn’t buy RPSIX.
It's presently 3 stars at M*, if anyone was wondering .... or cares about such ratings.
Just for giggles, I checked it aginst the members of my hybird income sleeve and it was a bottom performer compaired to the other funds in this sleeve. It carries a M* rating of three stars while members of my hybrid income sleeve are all four or five star funds. I know of some folks at my church that own this fund and favor it because of its market adapitability for reasons stated above. It does seem to come up a little short on the performance side when compaired to some other hybrid income type funds.
Good luck with your fund selection.
Old_Skeet
I don't dabble much in munis so I really can't offer much insight. That said on some of the muni funds I do look at, I consider things like duration, how much general obligation they have (lesser is better imo) and which sectors they are mostly filled with (health, transportation are better imo) along with any other outliers that might steer me away -- ie, why would a "single state muni fund", say Virginia, hold Puerto Rico bonds?
PRTAX and PRVAX are attractive to me, if I was looking at muni bonds. Or at least they were, a year or so ago when I did some basic research on them.
Here's an Investment News column about that (also linked to by a bullpen post):
https://www.google.com/search?q=The+Case+For+Favoring+Revenue+Bonds+Over+General+Obligation+Bonds&ie=utf-8&oe=utf-8
It mentions essential service revenue bonds. These are generally safer than other revenue bonds because they're backed by revenue from services that are, well, essential. But even here, one should look at what that municipal service provider is doing. If it is expanding (e.g. building water pipes into tracts of land that builders plan to develop), it pays to check into how likely the anticipated new revenue is to materialize.
Exposure to PRFDX (Equity Income Fund) seems to have helped in recent years, so rule that one out as the detractor. All I can think is it might be tilted heavier towards high quality (read “rate-sensitive”) bonds than I had assumed or might prefer.
I think a fund like that ought to be able to hold 20-30% in below investment grade debt (and EM). I’ll guess RPSIX is not that high. Another thought: They probably have a good slug of inflation protected bonds in the mix - and those might have been a drag in recent years.
Don’t have time to search for the credit quality breakdown. If anybody has that for RPSIX please share.
AA 3.44% 5.17%
A 9.80% 12.78%
BBB 18.30% 20.79%
BB 11.41% 18.68%
B 15.76% 14.29%
Below B 4.43% 4.40%
Not Rated 1.42% 2.58%
Percent of Long Fixed Income Assets
RPSIX
Credit Rating
Multisector Bond
Average
Chart
35.43%
AAA
Chart
21.30%
AAA
Is this what your looking for ? RPSIX on left _ Category Ave. on right.
Derf
Here’s the non-investment grade percentages from M*
BB 11.4%
B 15.76%
Below B 4.4%
Not Rated 1.4%
Total 33% (+ -)
So, in addition to the 10% equity position, it appears that close to 30% of the fund’s total holdings are in non-investment grade bonds. The puzzle remains as to why it hasn’t performed a little better.
Hopefully someone will comment. If not, you can always start a new thread on that one.
fundmojo.com/mutualfund/bestmanager.php?category=Muni+National+Interm
In the past, RPSIX’s primary weakness was its 10-20% stake in dividend stocks, which hurt returns in bear markets. However, this year has shown that it’s also vulnerable to rising interest rates.
Another income fund I own is DODIX. i’ve long allowed a smaller portion (no greater than 50%) to count as part of my “cash equivalent” holdings. Of course it’s not really cash - but for allocation purposes I’m willing to include it. DODIX has a longer history than TRBUX. So a 10 year comparison is possible. Here RPSIX still wins with a 6.28% return while DODIX netted 5.61%. Again - you need be willing to accept more volatility to reap the additional income with RPSIX.
While I’m not “married” to TRP (borrowing Crash’s words), it’s my single largest fund manager and has 100% of my Traditiinal IRA. So, I’ll stick with the 15% allocation to RPSIX. We’ve known for 10 years that bonds would suffer when the emergency Fed easing slowed or stopped and rates normalized / rose. Nothing too startling here. Yes, the foreign securities have taken a toll on the fund. I thought PRELX a brilliant idea when introduced. Unlike most of their international / EM bond funds, Price does not hedge this one against currency fluxuations. So the strong dollar has really hurt it. I’ve owned it before but doubt I will again.