At this time, I just don't see any good reason to hold most highly recommended and highly rated intermediate core/core plus bond funds with their low SEC dividend yield, now usually in the 1 - 2% range. An exception are multisector bond funds like PIMIX and TSIIX, for example, that may eke out total returns greater than their SEC yield.
As a retired and somewhat conservative investor, I have been looking for other low volatility options that may offer more competitive total returns in the current low interest rate environment. I have come across a promising alternative fund like ARBIX (SD = 2.94%), and also two allocation funds along the lines of the former BERIX fund, i.e., before it changed ownership, that usually had a small equity exposure of around 20%. The two funds are FIKFX (SD = 4.13%) and VASIX (SD= 4.72%).
I would appreciate any comments or suggestions for any additional fund options along these lines.
SWAN & DRSK are also on the menu. They seem to go well together.
Considering SVARX and CVSIX, but those are on the back burner.
Thanks, JD, for sharing.
Never considered using options-based funds. But, after a quick review, both SWAN & DRSK look quite promising. Need to do more DD, of course.
RPSIX +5.6% YTD and PRSNX +8.00% YTD.
YIELD: RPSIX 2.98% and PRSNX 3.2%.
PTIAX, another multisector bond fund, looks good and I'll add it to my watchlist to monitor its risk/reward performance. Certainly seems to belong in the company of PIMIX and TSIIX.
I also took a look at VWIAX/VWINX, a highly rated 40/60 allocation fund. Unfortunately, according to M*, the fund is subject to "extensive interest rate sensitivity" which doesn't work for me in the current extremely low interest rate environment. The fund will face a significant head wind if, as is likely, rates will go up over the next few years.
Hence, I am looking at another well regarded 40/60 allocation fund from Vanguard, VSCGX, that is less interest rate sensitive as an alternative to VWINX.
Over the past 3 months, I’ve been slowly evolving my low volatility equity and interest sensitive bond funds and cash, to more defensive funds. I followed with interest Lynn Bolin’s many articles in MFO and SA, and just became a MFO premium member to access the screening power there. I’ve swapped into SWAN, TMSRX, GAVAX, CTFAX and GIBLX. Lynn/MFO has covered these funds, along with others. My overall asset allocation remains the same, 50/50, but my risk profile feels much better. So far, so good.
Best of luck and happy holidays,
There is no magic cure in this low interest rate environment. With a duration of 8 years, VWINX may really hit the wall if rates go up. If there is a substantial equity pull back, you could lose 10 to 15% in a week or so.
I think at these valuations you are better off DCA into a target position over months if not a couple of years, unless you understand options well enough to buy puts ( which reportedly are very cheap now)
Currently, ARBIX, TMSRX, PIMIX and TSIIX make up 65% of my portfolio that I feel fairly comfortable with going into 2021. It's the other 35% that I am struggling with. With high equity valuations I might hide out in funds like FIKFX and VASIX, or do I keep using allocation funds like JBALX and VLAIX, for example, with significantly higher equity exposure, in the hopes that the new vaccines we will soon establish herd immunity and the economy will come roaring back and stabilize the markets?
CTFAX looked like an excellent low volatility fund until its mandate was recently changed requiring it to hold a minimum of 50% in equities. I also looked at GAVAX but it's loss of 12.8% in 2018 makes me uneasy. Do you know by any chance what happened?
GIBLX, an excellent intermediate core-plus bond fund with a good record, used to be in my portfolio until very recently. But with a SEC yield of only 1.84% and a longish duration of 7.3, I don't see it repeating its past total return performance in the current low interest rate environment.
Anyway, just some random thoughts.
Wish you the best of luck and happy holidays.
Thanks for the suggestion, Observant.
RCTIX is already on my watch list and I am currently monitoring its risk/reward performance. So far, so good.
"There is no magic cure in this low interest rate environment. With a duration of 8 years, VWINX may really hit the wall if rates go up."
I quite agree with your opinion on VWINX and, as I said previously, another Vanguard fund, VSCGX, may be a better option at this time.
IVOL might be an option for some. I'm using that as my cash alternative at the moment.
I was always wondering what happened to former Berwyn Income Fund managers Cipollini and Saylor after they resigned in 2019. Looks like they finally found a new home at Penn Mutual. I will be following the new fund closely, it could certainly find a place in my portfolio. Hopefully, PMEFX will soon be available at Fidelity.
Thanks, again, much appreciated.
You inquired about GAVAX, here is a link to David Snowball's review:
FYI: here is the performance of the funds I mentioned, along with FIKFX and VASIX, during the March swoon. See this chart:
CTFAX and GAVAX are tactical allocation funds, so I'm looking/hoping for the managers to help with defense.
Re: CTFAX, I believe its strong performance during the March swoon reflects its new mandate, so that's encouraging.
Best of luck, happy new year!
Good luck in the new year.
Stay safe, Derf
PMEFX Inception 7/31/20.
As of 9/30/20: 25.7% equity and 74.3% bonds. Of the 74.3% bonds: 22.7% AAA, 6.1% BBB, 27.2% BB, 22.6% B, 3.9% CCC and 17.5% convertibles. Not enough time to see how the portfolio construction settles. Limit 40% equity exposure.
Stay Safe, Derf
I put PTIAX on my watchlist because I was comfortable with its risk/reward profile. Also, M*'s 3-Yr Risk vs. Category rating is "Low", and its Return vs. Category is "Above Average".
While 39% is certainly higher than 16%, the numbers are so low as to provide little insight. At best (i.e. assuming that the linear regressions are even meaningful), it says that 2/5 of PTIAX's gains/losses can be explained by movements in the "bond market".
Multisector bond funds don't resemble the bond market and so comparing performance with the broad market doesn't offer much insight. M* doesn't even benchmark the category against this index. Instead it uses Bloomberg Barclays U.S. Universal Bond Index. (See the footnotes under the Risk and Volatility Measures table cited.)
FWIW, the index that M* finds to be the best fit to the fund is a 65/35 blend of Barclays High Grade and Barclays High Yield indexes. Which isn't all that surprising given that the fund has about 10% BB or below and another 8% unrated. That's less junk than the category average (40% BB or below and 5% unrated), which also explains its higher but still small correlation with the (investment grade) aggregate bond index.
Compare this with a multisector fund like TSIIX which comes close to category average allocations: 36% BB or below and 4% unrated). With more junk, its R² relative to the investment grade aggregate bond index of 15.30% is nearly the same as the category average 16%.