Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
“PRWCX was a very conservative balanced fund years ago … Giroux has produced stellar total return, but it does not fit very well into a "bond" thread…”
I was merely responding to this sentence from FD-100 (same thread): “PRWCX performance since 2000 shows that it made more money than the SP500 with lower volatility.”
Of course PRWCX’s not a bond fund. I do like stepping on sacred cows now and than (like PRWCX) - even though I own the fund myself. As far as bonds, Giroux in the last year has described them a very poor investment which he avoids - except for a few of the high-yield and convertible types. (Perhaps that qualifies him for inclusion in this thread?)
As far as risk, Giroux asserts in his most recent fund report that he thinks he can preserve investors’ principal over a 3-year time horizon. That, I think, remains to be proven. Yes - a more aggressive fund today. Exposure to tech and large caps has hurt his performance recently. However - I wouldn’t bet against this guy.
Thinking about the original question, I've tried to take a step back and reformulate the question a bit: what is a bond, and why would one own a bond (or in the aggregate a bond fund)?
From a business finance perspective, a bond is a way to raise cash without selling part of a company. Funds are characterized as bond funds if they hold these financial instruments; not if they behave like traditional bonds. This is an important distinction because it affects what we mean when we talk about bond funds.
From an investor perspective, a traditional IG bond is a way to get a better return than in a bank. In exchange, one takes on a modest amount of risk, some of which can be diversified away in a fund. IG bonds preserve nominal principal, though inflation gradually reduces their value over time.
One diverges (slightly) from this traditional perspective of bonds as pure income streams when one starts trading bonds in an attempt to increase total return. This began in the 70s, largely with Bill Gross and total return funds. These funds take on a measure of equity characteristics, especially as they add junk bonds. At this point, ISTM one is at the edge of crossing over from "bonds" to "allocation" funds, in behavior albeit not in name.
Moving on, multisector bond funds behave significantly like allocation funds. But because they're still bond funds from a finance perspective, people can feel good about eating their vegetables - investing in "bonds" while getting better returns.
Here's Portfolio Visualizer's correlation matrix of a "pure bond" (albeit leveraged) multisector fund PDIIX, a multisector fund with a 13% equity kicker RPSIX, and a rougly 40/60 allocation fund (disregarding cash) FTANX. The five year time frame I selected is the period covered by PDIIX's current management team including Ivascyn.
They're all pretty well correlated. Further, annualized standard deviations are quite close together, ranging from 5.62% to 5.84%. In terms of risk and performance these multisector funds feel like hybrid funds.
I do own a multisector fund (none of the funds here), but I expect it to behave like a hybrid fund. It's just another way for me to get that risk/reward profile.
To the extent that I use IG bond funds, they're there to serve as the last bastion before dipping into equities should stocks swoon for several years. On the short end, I use short/ultrashort funds as backup to pure cash - a bit more return in exchange not drawing upon them monthly in case of hiccups.
I've no bond funds for a traditional, widows and orphans, monthly pension type cash flow.
Hey hank, posters have flexibility to take threads in any direction they choose. My point is simply that this thread is about "Bond Funds", not "Allocation Funds". When you introduce Allocation Funds into the discussion, then it inevitably involves a mix of many assets, generally anchored by the % of equities that the allocation fund historically uses. That can lead to a comparison of completely different kinds of allocation funds, who use all sorts of alternative assets, in conjunction with their equity exposure. So if you look at funds like FPACX, VWELX, and PRWCX (moderate allocation funds), those 3 funds have very different philosophies, from very different companies, but all heavily linked to various asset classes, as offsets for equities, and all attempting to "preserve investors principal" over a period of many years. I guess it all has value to a poster/lurker, and they can extract whatever value they want out of the comments in the thread.
I choose to take the thread at its face value--discussions about varying types of bond funds, and depending on what kind of investor you are, those bond funds can be used in many different ways. Clearly, you can use bond funds as ballast options, as complements to your equity exposure. Others can use bond funds in other ways for their portfolios, and there are a few investors like me, who use varying types of bond funds exclusively, without an equity component.
Here’s what PRWCX manager David Geroux said recently about IG bonds as an investment:
“What I would tell you about rates today is that the risk/reward on Treasuries or IG [investment grade] is so poor, it gets a situation where if rates stay static, you make very, very low returns. If rates revert back to more normalized levels, you lose a lot of money. And if rates go down, you don't have a lot of room for rates to go down … So, it's a really negatively skewed risk-adjusted return … As a result of that, we have a very short duration in our fixed-income portfolio, probably the shortest duration we've had since I've been running this strategy. Our duration today is 1.5 years”LINK
Your attempts to immunize the thread from mention of PRWCX or manager David Geroux’s views on the question “Why do you still own Bond funds?” sounds to me a bit cocoonish. Why would your view, or my view, or that of anyone else here on the question supersede that of Mr. Geroux as both verbalized by him publicly and as practiced thru his management approach? -
“David Geroux is a five-time nominee and two-time winner of Morningstar's Fund Manager of the Year award in the allocation category. David’s fund has also won 15 "Best Fund" awards 2 from Lipper. “ LINK
Here’s what PRWCX manager David Geroux said recently about IG bonds as an investment:
“What I would tell you about rates today is that the risk/reward on Treasuries or IG [investment grade] is so poor, it gets a situation where if rates stay static, you make very, very low returns. If rates revert back to more normalized levels, you lose a lot of money. And if rates go down, you don't have a lot of room for rates to go down … So, it's a really negatively skewed risk-adjusted return … As a result of that, we have a very short duration in our fixed-income portfolio, probably the shortest duration we've had since I've been running this strategy. Our duration today is 1.5 years” LINK
Your attempts to immunize the thread from mention of PRWCX or manager David Geroux’s views on the question “Why do you still own Bond funds?” sounds to me a bit cocoonish. Why would your view, or my view, or that of anyone else here on the question supersede that of Mr. Geroux as both verbalized by him publicly and as practiced thru his management approach? -
“David Geroux is a five-time nominee and two-time winner of Morningstar's Fund Manager of the Year award in the allocation category. David’s fund has also won 15 "Best Fund" awards 2 from Lipper. “
Okay hank, I am not attempting to "immunize the thread" from mentioning PRWCX. I am simply stating that PRWCX is not a Bond Fund, it is an allocation fund, in which equities are the focused investment, and bonds are more in the "ballast" category, as a complement to equities. I have been in many thread debates, in which PRWCX investors, do not think PRWCX should even be classified as an "allocation fund", but rather it should be classified as a value oriented equity fund. Giroux has a history of being a value oriented investor, who will decrease equities when he thinks they are overvalued, and use the bond component (or cash) as a way of holding assets, that can be used to buy equities when they are fairly valued. There are many investors who invest in that manner, but the question is what "bond fund" are they going to use as a ballast fund for their equities, or will they just pick their favorite allocation fund, and let that manager choose bonds as they desire. Other investors, are more focused bond fund investors, who will use selected "bond funds" for total return and ballast. When they look to "bond funds", it makes sense to look at those "bond fund" managers, who excel in performance for those bond funds, to meet bond fund objectives, that fit the roles investors using those "bond funds". What I have learned about your posts on PRWCX, is that Giroux is a great "allocation fund" manager, who believes that Investment Grade Bond oefs and treasuries are out of favor for his allocation fund, and the other types of bonds (not specifically identified for this thread) are short duration bond holdings. I choose to emphasize what great bond fund managers, (like Ivascyn, Gundlach, etc.) are doing with their investments, but other posters/lurkers will likely find value in other ways on this "bond fund" thread.
Current yield PRWCX is just 1%. I note (again) the HEAVY chunk of the portfolio in utilities. 14% vs. category avg. of just 3.5%. Traditionally, utilities operate like bonds, with the steady income stream. Surely, dividend-paying utilities are the place to be recently, with bonds offering so little, eh? Giroux has said recently that as these utilities continue to green-ify, they are becoming a GROWTH story, too.
I am in bond funds because they offer me the best returns with the lowest risk. Their trend persistency combined with their low volatility enable me to best implement the scale up buying strategy I learned from Nicolas Darvas. My first bond trade was in junk bonds in 1991. It was January 17 one of the greatest momentum days ever in equities. That day the Dow surged some 114 points which at that time was its second best on record. As is often the case there was a lag and a few days later junk bonds went on tear and had 60 consecutive trading days without a decline. That smooth ride upward continued for the next three years until February 1994 in junk bonds as they bested the S@P over that period.
That one LUCKY trade made a lasting impression on me and the way I have traded my capital ever since. Most especially after the tech wreck in March 2000. There have been many repeat performances and exhibitions of unreal trend persistency since 2000 in various bond fund categories. Emerging market debt in the early 2000s, junk bonds 2009-12, junk munis 2014, bank loans 2016, and last but not least the securitized category since last spring - IOFIX, BDKAX, abd SEMPX. IOFIX has had something like only 8 down days since last April 2020 when many of the veteran bond traders re entered. An amazing run over a 15 month period.
Some remember me as a day trader in the stock index futures. Others as a trader in tech funds who also exploited the new fund effect as well as datelining. Yet less than 3% of my total trading profits have come from daytrading and only around 13% from tech funds, new funds, datelining. Meaning almost 85% of my nest egg has come from bond funds - my one true love in the financial arena. I have always said everyone needs a trading or investing niche and I found my niche in bond funds.
Hi @Mona, nope, haven't posted on Armchair. I'm just doing my own investment thing and spending a lot of time helping get a startup nonprofit off the ground. You must be enjoying the junk & semi-junk muni ride; that and securitized credit have been outstanding the past year. Take care -- Just call me Andy ...
Junk and semi-junk munis and securitized. Yup: PTIAX. Muni: 40.35 Securitized: 47.19% ... Yet, alas: YTD up a mere 1.18 and in the 67th %ile. Love the monthlies, though. PTIAX.
Junk and semi-junk munis and securitized. Yup: PTIAX.
Hiya Crash, Their limited total return this year is down to the kind of munis they own: long term, IG, and rate sensitive. That's overall/longer term a decent way to barbell lower quality structured credit, but those munis haven't fared nearly as well this year as junk or mixed IG & junk.
It's still my one rate-sensitive taxable fund. Their new fund PTCRX is looking pretty good - with more credit and a just a small stake in munis compared to PTIAX.
Notice, though, how PTIAX is racking up gains since 10y and 30y Treasury yields have been falling just in the last few days.
Yes, you and I (and maybe a few others) are the Perf Trust Appreciation Association.
Hi @Mona, nope, haven't posted on Armchair. I'm just doing my own investment thing and spending a lot of time helping get a startup nonprofit off the ground. You must be enjoying the junk & semi-junk muni ride; that and securitized credit have been outstanding the past year. Take care -- Just call me Andy ...
Hi Andy,
In large part thanks to you, I have done very well! But please don't tell anyone and let that be a secret between us!!
Comments
Of course PRWCX’s not a bond fund. I do like stepping on sacred cows now and than (like PRWCX) - even though I own the fund myself. As far as bonds, Giroux in the last year has described them a very poor investment which he avoids - except for a few of the high-yield and convertible types. (Perhaps that qualifies him for inclusion in this thread?)
As far as risk, Giroux asserts in his most recent fund report that he thinks he can preserve investors’ principal over a 3-year time horizon. That, I think, remains to be proven. Yes - a more aggressive fund today. Exposure to tech and large caps has hurt his performance recently. However - I wouldn’t bet against this guy.
From a business finance perspective, a bond is a way to raise cash without selling part of a company. Funds are characterized as bond funds if they hold these financial instruments; not if they behave like traditional bonds. This is an important distinction because it affects what we mean when we talk about bond funds.
From an investor perspective, a traditional IG bond is a way to get a better return than in a bank. In exchange, one takes on a modest amount of risk, some of which can be diversified away in a fund. IG bonds preserve nominal principal, though inflation gradually reduces their value over time.
One diverges (slightly) from this traditional perspective of bonds as pure income streams when one starts trading bonds in an attempt to increase total return. This began in the 70s, largely with Bill Gross and total return funds. These funds take on a measure of equity characteristics, especially as they add junk bonds. At this point, ISTM one is at the edge of crossing over from "bonds" to "allocation" funds, in behavior albeit not in name.
Moving on, multisector bond funds behave significantly like allocation funds. But because they're still bond funds from a finance perspective, people can feel good about eating their vegetables - investing in "bonds" while getting better returns.
Here's Portfolio Visualizer's correlation matrix of a "pure bond" (albeit leveraged) multisector fund PDIIX, a multisector fund with a 13% equity kicker RPSIX, and a rougly 40/60 allocation fund (disregarding cash) FTANX. The five year time frame I selected is the period covered by PDIIX's current management team including Ivascyn.
They're all pretty well correlated. Further, annualized standard deviations are quite close together, ranging from 5.62% to 5.84%. In terms of risk and performance these multisector funds feel like hybrid funds.
I do own a multisector fund (none of the funds here), but I expect it to behave like a hybrid fund. It's just another way for me to get that risk/reward profile.
To the extent that I use IG bond funds, they're there to serve as the last bastion before dipping into equities should stocks swoon for several years. On the short end, I use short/ultrashort funds as backup to pure cash - a bit more return in exchange not drawing upon them monthly in case of hiccups.
I've no bond funds for a traditional, widows and orphans, monthly pension type cash flow.
I choose to take the thread at its face value--discussions about varying types of bond funds, and depending on what kind of investor you are, those bond funds can be used in many different ways. Clearly, you can use bond funds as ballast options, as complements to your equity exposure. Others can use bond funds in other ways for their portfolios, and there are a few investors like me, who use varying types of bond funds exclusively, without an equity component.
Here’s what PRWCX manager David Geroux said recently about IG bonds as an investment:
“What I would tell you about rates today is that the risk/reward on Treasuries or IG [investment grade] is so poor, it gets a situation where if rates stay static, you make very, very low returns. If rates revert back to more normalized levels, you lose a lot of money. And if rates go down, you don't have a lot of room for rates to go down … So, it's a really negatively skewed risk-adjusted return … As a result of that, we have a very short duration in our fixed-income portfolio, probably the shortest duration we've had since I've been running this strategy. Our duration today is 1.5 years” LINK
Your attempts to immunize the thread from mention of PRWCX or manager David Geroux’s views on the question “Why do you still own Bond funds?” sounds to me a bit cocoonish. Why would your view, or my view, or that of anyone else here on the question supersede that of Mr. Geroux as both verbalized by him publicly and as practiced thru his management approach?
-
“David Geroux is a five-time nominee and two-time winner of Morningstar's Fund Manager of the Year award in the allocation category. David’s fund has also won 15 "Best Fund" awards 2 from Lipper. “ LINK
“What I would tell you about rates today is that the risk/reward on Treasuries or IG [investment grade] is so poor, it gets a situation where if rates stay static, you make very, very low returns. If rates revert back to more normalized levels, you lose a lot of money. And if rates go down, you don't have a lot of room for rates to go down … So, it's a really negatively skewed risk-adjusted return … As a result of that, we have a very short duration in our fixed-income portfolio, probably the shortest duration we've had since I've been running this strategy. Our duration today is 1.5 years” LINK
Your attempts to immunize the thread from mention of PRWCX or manager David Geroux’s views on the question “Why do you still own Bond funds?” sounds to me a bit cocoonish. Why would your view, or my view, or that of anyone else here on the question supersede that of Mr. Geroux as both verbalized by him publicly and as practiced thru his management approach?
-
“David Geroux is a five-time nominee and two-time winner of Morningstar's Fund Manager of the Year award in the allocation category. David’s fund has also won 15 "Best Fund" awards 2 from Lipper. “
Okay hank, I am not attempting to "immunize the thread" from mentioning PRWCX. I am simply stating that PRWCX is not a Bond Fund, it is an allocation fund, in which equities are the focused investment, and bonds are more in the "ballast" category, as a complement to equities. I have been in many thread debates, in which PRWCX investors, do not think PRWCX should even be classified as an "allocation fund", but rather it should be classified as a value oriented equity fund. Giroux has a history of being a value oriented investor, who will decrease equities when he thinks they are overvalued, and use the bond component (or cash) as a way of holding assets, that can be used to buy equities when they are fairly valued. There are many investors who invest in that manner, but the question is what "bond fund" are they going to use as a ballast fund for their equities, or will they just pick their favorite allocation fund, and let that manager choose bonds as they desire. Other investors, are more focused bond fund investors, who will use selected "bond funds" for total return and ballast. When they look to "bond funds", it makes sense to look at those "bond fund" managers, who excel in performance for those bond funds, to meet bond fund objectives, that fit the roles investors using those "bond funds". What I have learned about your posts on PRWCX, is that Giroux is a great "allocation fund" manager, who believes that Investment Grade Bond oefs and treasuries are out of favor for his allocation fund, and the other types of bonds (not specifically identified for this thread) are short duration bond holdings. I choose to emphasize what great bond fund managers, (like Ivascyn, Gundlach, etc.) are doing with their investments, but other posters/lurkers will likely find value in other ways on this "bond fund" thread.
That one LUCKY trade made a lasting impression on me and the way I have traded my capital ever since. Most especially after the tech wreck in March 2000. There have been many repeat performances and exhibitions of unreal trend persistency since 2000 in various bond fund categories. Emerging market debt in the early 2000s, junk bonds 2009-12, junk munis 2014, bank loans 2016, and last but not least the securitized category since last spring - IOFIX, BDKAX, abd SEMPX. IOFIX has had something like only 8 down days since last April 2020 when many of the veteran bond traders re entered. An amazing run over a 15 month period.
Some remember me as a day trader in the stock index futures. Others as a trader in tech funds who also exploited the new fund effect as well as datelining. Yet less than 3% of my total trading profits have come from daytrading and only around 13% from tech funds, new funds, datelining. Meaning almost 85% of my nest egg has come from bond funds - my one true love in the financial arena. I have always said everyone needs a trading or investing niche and I found my niche in bond funds.
Thank you for the pleasing post.
Take care of you and yours,
Catch
Muni: 40.35
Securitized: 47.19%
... Yet, alas: YTD up a mere 1.18 and in the 67th %ile. Love the monthlies, though. PTIAX.
It's still my one rate-sensitive taxable fund. Their new fund PTCRX is looking pretty good - with more credit and a just a small stake in munis compared to PTIAX.
Notice, though, how PTIAX is racking up gains since 10y and 30y Treasury yields have been falling just in the last few days.
Yes, you and I (and maybe a few others) are the Perf Trust Appreciation Association.
Cheers, AJ
In large part thanks to you, I have done very well! But please don't tell anyone and let that be a secret between us!!
Best,
Mona
Great to read your post. Thank you!
Hope you are making time for hiking since I know how much you enjoy it.
Best
Mona