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Bond Fund comparison

In this awful market I see my WATFX has had some poor days. Would it be wrong to switch? I see PIMIX is doing better. Since I have over $100,000.


  • DODIX is "core-plus," not strictly "core." But I'd bet you could not do any better. $67B AUM, getting bloated. But so is PIMCO, eh? PIMCO, even more so.
  • good suggestion Crash. Will check further.
  • msf
    edited October 2020
    WATFX has had some poor days.

    This sounds more like performance chasing than a fundamental reason to change horses. It has lost 1% in the past three months. About 1/2% worse than DODIX, and still in the middle quintile (barely, at 59th percentile) of its peers.

    Rather than jumping at particular funds, I suggest thinking first about the type of fund you want to own. WATFX is an excellent vanilla bond fund; if that's the type of fund you want, I wouldn't switch. DODIX (and I'll add BCOIX) are great core plus funds. That means that they add a fair amount of junk bonds, which have higher yields but also tend to move more like stocks. PIMIX is a multisector fund. These funds tend to have even more junk and may dabble in international bonds.

    PIMCO funds, virtually all of them, are off in their own world and it's difficult to say exactly what they're doing at any given instant. M* likes PIMIX, describing the fund as one that "stands out for historically large positions in nonagency mortgages, which have helped drive strong performance in a variety of different market environments. It also buys corporate debt, and emerging-markets and developed foreign sovereign debt, with a sprinkling of non-U.S. dollar currency bets."

    Many people here are comfortable with this. The question is, are you? You'd be switching from a vanilla, high credit quality bond fund, albeit a relatively racy one (above average risk), assuming any vanilla bond fund can be called racy.

    Here are a couple of graphs that may help to illustrate what I mean about performance chasing and risks:

    Performance since 8/10/20 (WATFX's peak for the year, I believe)
    Notice that the core fund (WATFX), core plus funds (DODIX, BCOIX), and market average (US Aggregate index) tend to track together. So does the multisector fund PDIIX, though with wider swings both up and down. But PIMIX goes its own way.

    Now zoom out to YTD (click on the YTD link in the graph). You'll see that both the PIMCO funds take on a lot more risk - a huge dip in March, relative to the other funds. Over the long term, risk usually pays off. But that line of reasoning also suggests paying less attention to short term movements.

    Here's a second graph, same funds, this one for the three year period before 2020 (2017-2019). It shows both PIMCO multisector funds outperforming. Notice that aside from separating a bit, all the funds still tend to track together except PIMIX. It diverges in the summer of 2019, with performance dropping from that of PDIIX to that of the more conservative funds.

    My suggestion is to think first about what kind of fund you want to own. You might still wind up investing in PIMIX, but it will be for reasons beyond its performance over the past couple of months.

    Side note: PIMIX is available with a $25K min at Vanguard and a $2500 min at Schwab.
  • edited November 2020
    The single biggest variable longer term IMHO on bond funds is fees. Especially today, investment grade bond funds aren’t going to produce large returns (consistently anyway) without taking a large amount of risk. So, fee differences mean more with bond funds than with equity funds.
    At .45% ER, WATFX is competitive on fees along with DODIX. Generally, that’s a low or reasonable fee for a core managed bond fund. The best source I know of on bond funds‘ holdings and performance history is Yahoo. I’ve entered your fund there and than clicked on:


    For interest rate sensitivity, look at “Duration” on the right. The fund is at 7 years on duration, a bit on the long side by today’s (cautious) standards - even for an intermediate term fund. By contrast, DODIX (mentioned in this thread) is a bit over 4 years on duration. WATFX should have fallen a few percent over the past 3 weeks as rates spiked. The benchmark 10-year bond‘s rate rose from below 0.60% a few weeks ago to 0.80%% today. (Rates up. Bond prices down.) The longer the duration, the more drastic the move. On the good side, your fund should be able to reinvest maturing issues at higher interest rates which will feed back into your proceeds. A caveat, however, is that investors might choose to flee. In that case, it’s harder for the fund to “self-correct”.

    A second important ingredient in bond performance is credit quality. It looks like WATFX is weighted toward the middle or upper range relative to its peers. Ironically, it’s been the lower rated bonds (BB / BBB) that have had the nicest ride up in value since March due to the unprecedented actions of the Federal Reserve in buying-up (essentially backing) corporate bonds as low as BBB quality before they could fall further into junk (BB) territory. Nobody could have foreseen that action on the part of the Fed. Likely, this sharp uptick in value for lower rated bonds is temporary. But that, along with the longer than average duration, helps explain a lot about your fund’s recent behavior.

    Rather than comparing performance (“chasing” per msf) I’d recommend thinking about the type of bond fund that best fits your long term style of investing and overall portfolio. What you have now is a core fund, weighted a bit on the long end of duration and hewing toward the higher quality end of the credit spectrum. The biggest advantage is it should help hedge equity losses in the future, as high quality longer duration bonds tend to rise a bit when equities tumble (though that wasn’t the case last week). Longer dated bonds also command higher rates of return. Your fund invests in higher quality credits. So, should junk and lower quality bonds decline, your fund should stand up better.

    Bonds today really represent a “Catch-22.” Rates are so low that it’s unlikely bonds will reward investors for the risk they’re taking for a good many years and until rates are significantly higher. But that’s just a guess on my part. The experts have been predicting the “end of time” for bonds for at least the last decade. Generally, they’ve been wrong in that assessment. I’m 74 and retired. I certainly don’t want 100% invested in equities. Nor do I want to play much in the junk bond area. So, somewhat begrudgingly, I have about a quarter of assets in intermediate duration investment grade bond funds. A younger investor need not be as cautious.

    Good luck.

  • You got great posts already. I would think about the risk/volatility I want to take.
    WATFX is a core bond fund.
    The next level are core plus funds such as DODIX.
    Then, you can look at Multi sector funds which are worth holding for a portion of your money as rates are low and may go up. These funds usually have more volatility and higher distributions/income.
    PIMIX is a pretty good fund but used to be a great fund until 01/2018. I prefer TSIIX for longer hold. If you need more ballast, I like PTIAX.
  • Thanks FD. Whatever I decide to buy will replace some of WATFX or cash. Looks like could be TSIIX, Thornburg looks a lttle less volatile.
  • I respectfully suggest GIBLX for what you're looking for. One of my favorites, perhaps my ultimate favorite at the moment.
  • edited November 2020
    wxman123 says: "I respectfully suggest GIBLX for what you're looking for. One of my favorites, perhaps my ultimate favorite at the moment."

    GIBLX used to be one of my favorites, but with rates seemingly going up, I currently prefer funds with shorter duration, for example, PIMIX, TSIIX, SCPZX, etc.

    Good luck,

  • Rates have been "seemingly going up" for a very long time. In Minerd I trust.
  • msf
    edited November 2020
    Here's a table (data from M*) comparing the 3/5/10 year standard deviations of several of the funds listed. I've divided it into funds with high grade portfolios and funds holding substantial amounts of junk bonds. Not surprisingly, over every time period the latter have been more volatile regardless of differences in durations.

    You can reproduce this data by starting with the M* legacy ratings & risk page for WATFX and then adding (using "Compare") the tickers for your funds of interest:
    Fund	3yr	5yr	10yr
    DODIX 3.62 3.26 2.93
    WATFX 4.00 3.63 3.22
    BCOIX 4.11 3.64 3.30
    PTIAX 4.65 3.87 3.47
    TSIIX 4.92 4.25 4.05
    PIMIX 5.58 4.52 4.21
    As @hank wrote (third paragraph, above), the funds with better short term performance tended to hold lower quality bonds. Most multi-sector bonds, including the ones above, have average credit ratings of BB. The core plus bonds above (DODIX, BCOIX) are rated A, the core bond fund WATFX is rated AA.

    Buying into junk bonds, especially with cash, is a bet that the economy won't sink into a recession, or if it does, the government will bail out companies that were already shaky.

    Here's a table showing past performance other than very short term. I've added a column, 3yr(2019) that gives annualized performance figures over the period 2017-2019. That gives a sense of more recent multi-year performance while excluding the unusual ups and downs of 2020.

    As above, the table is divided into funds with high grade and with junk bond portfolios. Over extended periods or periods excluding 2020, higher risk (junk) has done better. Over the past year or three years if one includes 2020, it has not.
    Fund	YTD	1yr	3yr	3yr(2019)  5yr	 10yr
    WATFX 6.63% 7.56% 5.56% 4.91% 4.95% 4.53%
    BCOIX 7.02% 7.70% 5.55% 4.66% 4.92% 4.50%
    DODIX 6.73% 7.40% 5.39% 4.52% 4.98% 4.34%
    TSIIX 5.71% 6.71% 4.85% 4.94% 5.32% 5.42%
    PTIAX 3.34% 3.42% 4.49% 5.45% 5.05% 5.83%
    PIMIX 1.54% 3.38% 3.57% 5.68% 5.26% 6.86%

  • The above is a good discussion and why I keep trading bond funds. If you own higher-rated bond funds you are likely to make 2.5-3% average annually in the next several years.
    Trading should not be done by most investors though;-)
  • I started to check the expense of some funds i might consider adding and saw TSIIX was.60 and PIMIX was1.09, both too much higher.
  • msf
    edited November 2020
    M* reports an adjusted ER for PIMIX of 0.50%. (See footnote 1 of Annual Fund Operating Expenses in Summary Prospectus.)

    Average HY fund ER: 1.02%
    Average multisector fund ER: 1.00%
    Average core plus fund ER: 0.80%
    Average core fund ER: 0.66%
    (All figures from M* via premium fund screener)

    If you really want a multisector fund and find TSIIX too expensive, the only less expensive multisector funds I can find available to retail investors are:

    BWDTX 0.40% ER ($5M min, but with that amount seems to be available at TDAmeritrade)
    JMSIX 0.42% ER ($100min NTF at Schwab)
    MGFOX 0.52% ER ($10M min, but with that amount seems to be available at Vanguard)
    JSTIX 0.54% ER ($2500 min/$1K IRA min at Schwab)
    MGIIX 0.55% ER ($1M min, $2500 IRA min at Fidelity)
    MWFEX 0.55% ER ($3M min at multiple brokerages)

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