From M*: "Osterweis Strategic Income is a unique high-yield offering with a strong risk-adjusted return profile, particularly over the longer term." It also rates the fund's risk as "low".
I am using this fund along with NVHAX and RCTIX in the bond portion of my portfolio. While its YTD total return is "only" 4.2%, its 3, 5, 10 and 15 year returns range consistently between 5 and 6%. The fund's average effective duration is currently 1.9, and the standard deviation 5.7.
As a conservative and retired investor, I am quite happy with OSTIX's consistent performance over the past 15 years. Thought it deserves to be mentioned again since the last time this fund was discussed was nearly a year ago.
Risk 5 - APR vs Peer (-4.3 ) !! Would MAXDD - 6.2 be a plus ?
The data Charles posted is only 6 months long from 2021, Jan to 2021, June. MFO risk ranking reflected the fund has not done well in 2021 as the rotation of growth stocks to the value funds (large and small stock funds) started in late 2020. A small pullback in May 2021 is reflected in the -6.2% MAXDD. Many small cap growth funds are volatile. You can review the longer track record of OSTGX in MFO Premium.
OSTGX has been profiled by David Snowball on September 2020 in the link below.
Jim Callinan the fund manager has an excellent and long track record in small cap growth stocks. When the environment favors this asset class, the fund excels comparing to his peers.
OSTIX was a recommended bond fund for his clients by BobC who retired from his advisory business. I invested with this fund as well for the same reason as @fred495 stated - consistency for year-to-year.
497 1 finalsupplement.htm 497
DIAMOND HILL FUNDS
Diamond Hill Corporate Credit Fund
Diamond Hill High Yield Fund
(All Share Classes)
Supplement dated June 30, 2021
to the Prospectus, Summary Prospectus and Statement of Additional Information
dated February 28, 2021 As Amended
A Special Meeting of Shareholders of Diamond Hill Corporate Credit Fund and Diamond Hill High Yield Fund (each a “Fund” and collectively the “Funds”) was called on June 11, 2021, at 10:00 a.m. Eastern Time, to approve Agreements and Plans of Reorganization (each a “Plan” and collectively the “Plans”), which provide for the acquisition of all the assets and liabilities of the Diamond Hill Corporate Credit Fund by the BrandywineGLOBAL – Corporate Credit Fund in exchange for shares of beneficial interest of the BrandywineGLOBAL – Corporate Credit Fund and for the acquisition of all the assets and liabilities of the Diamond Hill High Yield Fund by the BrandywineGLOBAL – High Yield Fund in exchange for shares of beneficial interest of the BrandywineGLOBAL – High Yield Fund.
Only shareholders of record as of the close of business on March 31, 2021 were entitled to notice of, and to vote at, the Special Meeting.
On June 11, 2021, shareholders of the Diamond Hill Corporate Credit Fund approved the Plan. The Special meeting of Shareholders for the Diamond Hill High Yield Fund was adjourned until June 29, 2021. On June 29, 2021, the shareholders of the Diamond Hill High Yield Fund approved the Plan.
Accordingly, the reorganizations are expected to occur after the close of business on July 30, 2021, or such other date as the parties may agree. The Funds will as soon as practicable prior to the closing date of the reorganizations, declare and pay to the shareholders of record of each respective fund, one or more dividends so that each will have distributed substantially all of the sum of (i) its investment company taxable income and (ii) its net tax-exempt income, if any.
This document is not an offer to sell shares of either the BrandywineGLOBAL – Corporate Credit Fund or the BrandywineGLOBAL – High Yield Fund, nor is it a solicitation of an offer to buy any such shares.
PLEASE RETAIN THIS SUPPLEMENT FOR FUTURE REFERENCE
TR 1yr, 3 yr, 5yr, Life
DHHIX: 17.3%, 10.6%, 10.3%, 9.1%
LFLAX: 5.6%, 7.0%, 5.9%, 6.2%
As I described in this AMG thread, Brandwyine funds were affiliated with and then acquired by AMG a couple of decades ago. They were rebranded AMG Brandywine, and earlier this year completely overhauled. The original management company Friess Associates was jettisoned as submanager. Friess then relaunched Brandwine funds as Friess Brandywine.
Legg Mason acquired acquired Brandywine Asset Management Inc. in early 1998. On August 17, 1998, Legg Mason launched Brandywine Small Cap Portfolio, managed by Brandywine Asset Management. It was a fund designed for institutional investors ("pension plans, endowments, and foundations"), and was based on a private portfolio managed by Brandywine Asset Management.
As of Dec 29, 1999, "Shares of the Brandywine Small Cap Portfolio [were] no longer being offered." Legg Mason's Brandywine moniker seemed to have vanished for several years.
Then in early 2006, Brandywine Assset Management changed its name to Brandywine Global Investment Management LLC. Shortly thereafter, Legg Mason launched what appears to be the first Brandywine Global submanaged fund: GOBIX, then called Global Opportunities Bond Fund. https://www.sec.gov/Archives/edgar/data/1474103/000119312512175846/d296312d485bpos.htm
The insertion of BW was the first time "Brandywine" seeped into the Legg Mason funds' names. But it was cosmetic; nothing about the management of the funds changed.
On Dec 29, 2017 the rebranding was complete, though again it was merely cosmetic: https://www.sec.gov/Archives/edgar/data/1474103/000119312517331311/d473516d497k.htm
The point of this story is that BrandywineGlobal funds are from Legg Mason. And unlike funds from other Legg Mason subsidiaries like Western Asset Management or Royce, the BrandywineGlobal funds are purely Legg Mason creations. There were no publicly offered BrandywineGlobal funds before Legg Mason launched them.
That makes DHHIX different from other BrandywineGlobal funds. It is more like the Western Asset Management funds that carried on after the management firm was acquired. Here, Legg Mason (now Franklin Templeton) isn't acquiring Diamond Hill, but it is hiring the fund's complete management team.
As @dtconroe stated, OSTIX has always invested in high yield bonds while some of characteristics are unique to the fund. The fund has one the shortest duration and invests in the higher credit quality end of junk bond spectrum. Overall the fund provides a modest total return while having a lower risk among typical high yield bonds. YIeld-to-date OSTIX is doing very well and gaining over 4% whereas many bond funds are barely breaking even.
On the M* page below, click on the "Expanded View" tab to see all of the past ten years and how the fund was classified in each of those years.
Fortunately, the Wayback Machine took a snapshot of the M* fund portfolio page as of Oct 31, 2013. The portfolio data on that page is dated Sept 30, 2013. It shows that the last time OSTIX was placed in the multisector bond category, an eighth of the bonds were rated AAA. IMHO that's not a portfolio that's "almost exclusively high yield bonds".
By the same token, that strikes me as a significant difference from today's portfolio, where only 2.35% of the bonds are investment grade, and none above BBB.
I'm not very familiar with this fund, so all I'll say about the strategy (having just looked at a few snapshots over time and read the strategy section of its prospectus) is that I'm inclined to agree that its strategy hasn't changed over time. But ... that strategy may led it to begin investing "almost exclusively [in] high yield bonds" some time after the stock market took off post GFC. Same strategy, changed market conditions, changed classification.
As I said, people's perception of time is often nonlinear. Perceptions don't matter, though. What matters are the actual numbers. Nearly 8 years since reclassification. Long enough that it would be inappropriate to compare OSTIX with multisector funds even based on historical performance.
The fund's portfolio for many years did, as you said, strongly resemble its current portfolio. However, its earlier portfolios did not. In its early years, OSTIX was significantly more diversified.
As M* described the fund its Dec 2011 analysis, "The managers can and have bought convertible bonds, preferred stock, and floating-rate notes in the past, but currently--and for much of the past few years--the portfolio has focused on shorter-term high-yield corporate bonds."
Multisector funds typically are more diversified than high yield funds. As OSTIX became less diversified, it more closely resembled high yield funds. Hence the reclassification in 2013, albeit with a substantial lag.
"As I said, I was drawn to OSTIX because of its consistent total return performance of between 5 and 6% over the past 3, 5, 10 and 15 years and its low duration. Additionally, I had no dedicated corporate HY bond exposure in my portfolio."
So fred's primary reason for owning is "its consistent total return performance" with his need/desire for HYB exposure as a secondary reason.
I am quite sure Fred does not need to have you speak on his behalf. I have had several forum discussions with Fred about his decision to invest in OSTIX, both at MFO and Armchair. He has his reasons for choosing to invest in OSTIX, but I did indicate to him I was going to do some updated due diligence on OSTIX to determine if I might have some renewed interest in it. My last post was just a post that I had completed my due diligence consideration of OSTIX, and don't have any personal interest in adding it to my portfolio. Fred and I have many conversations about bond oef investing, and I greatly respect his well thought out process of selecting bond oefs, but in this particular situation, we are just making different decisions about ownership of OSTIX
Hopefully, the benefits of diversification will play a positive role in this rather uncertain interest rate environment.
Thanks, as always, appreciate your comments and suggestions.
Overall, The Osterweis Strategic Income Fund ( OSTIX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and higher fees, this fund looks like a somewhat average choice for investors right now.
Don't stop here for your research...
For that matter, how do you have two funds otherwise identical (aside from cost), where all things are not equal? It appears that Zacks is equating how expensive a fund is solely with its ER. Otherwise it would note that since some other funds have loads, OSTIX is less expensive than (many of) its peers, all in, when you consider operating costs (ER) and purchase costs (loads).
Or maybe not. Zacks does allude to other factors aside from cost that affect how expensive a fund is. What could those be?
None of this refutes (or confirms) Zacks' claim that OSTIX "looks like a somewhat average choice". I merely suggest that Zacks could use a better set of bifocals when it describes what it sees.
If one is investing say $10K, and plans to hold for a bit more than a year, then OSTIX winds up being cheaper. It costs $40 (or less) per round trip. But with an ER of 0.88% vs. 1.22% for ATPAX, the 0.34% difference in ER saves about $34/year. One breaks even after about 14 months.
Another alternative if one is planning to hold for a couple of years is to invest in ATPYX instead of ATPAX. It comes with a transaction fee ($40 round trip), but its ER is 1.02% vs 1.22 for ATPAX (including a 0.20% 12b-1 fee). On a $10K investment, the lower ER saves about $20/year, so in about two years one breaks even.