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Diversifying with Bond Funds

KHaw24
in Fund Discussions
I currently 'manage' a portfolio for a family member. I'm looking to find a Multi-Sector/Global Bond Fund that diversifies my Fixed Income portion of the portfolio. Current Bond Fund is DODIX, an Intermediate Core Plus fund. Dodge & Cox has a solid Global Fund but it's hard to see overlap in Bond Funds on M*. Thanks to this site I've been introduced to PTIAX and a few other ideas...Any suggestions of crowd favorites I can research further. FYI - Brokerage Account is with TRP.

Thanks in advance!

Comments

  • beebee
    edited February 2021
    David Giroux (PRWCX) suggest Floating Rate loans (Leveraged Loans or Bank Loans). TRP price manages RPIFX (see if you can get around the $1M minimum) or PRFRX ($2500).

    Link to Bank Loan Mutual Funds:
    https://money.usnews.com/funds/mutual-funds/rankings/bank-loan
  • mcmarasco
    HSNAX/HSNIX (MU) is worth researching. It holds almost half in foreign bonds.

    It’s highly rated, solid performance and most metrics are at or near the top of the category.

    FYI: It’s not the most conservative multi-sector fund. Just depends on what you are looking for.

    Good luck,

    Matt
  • beebee
    edited February 2021
    Also, @FD1000 might better explain SVARX (ER around 3%).
  • Observant1
    You may want to research RCTIX and PDIIX in the Multisector Bond category.
  • CrashCrash
    edited February 2021
    "that diversifies my Fixed Income portion of the portfolio..."
    Just check to see that instead of diversifying, you are "de-worse-ifying." I've never felt the need to absolutely cover all bases in the investing universe.
    Global multi-asset bonds:
    I own PRSNX and RPSIX, both TRP funds. They serve me well, particularly in the current zero interest rate regime. PRSNX is dollar-hedged, though. Remember: the shorter the duration, the smaller your dividends.
  • stillersstillers
    In no particular order, I think all of these would add worthy diversification...
    HY Munis: OPTAX, NHMAX, MDYHX, GHYAX, MMHAX, VWAHX, VWLTX
    BL: EAFAX
    HY: VWEHX
    MS: PTIAX, PIMIX, TSIAX, HSNAX
    STB: LALDX, VSCSX
  • johnNjohnN
    edited February 2021
    Hello... 65% of Mama portfolio comprised of FBND. BND, fidelity2020 Fpifx, fidelitycash FCASH, and trp2020 funds TRRBX

    She has many private bond corps from Ford att tmobile GM BAC

    Btw most cash CD/ yields are extremely low now so unclear if these are good vehicles going forward

    Kind regards
  • KHaw24
    Great stuff ...will start researching
  • stillersstillers
    edited February 2021
    To add to my prior post, I would suggest the first couple on my list (if you're interested in it) to look at closely for your stated purpose of diversification would be PTIAX and one of the HY munis. They will however NOT get you the global exposure you seek, but they will give you diversification.

    Note that World bond and/or EM bond funds can be VERY difficult categories to do well in. I tend to get my little bit of foreign bonds via other bond bonds, NOT a dedicated World bond fund. DODLX, cousin to DODIX(?), may be one of your best options there.

    https://fundresearch.fidelity.com/fund-screener/results/table/overview/averageAnnualReturnsYear3/desc/1?assetClass=TBND&category=IB,EB,XP,WH&mStarRating=4,5&ntf=&order=fundType,ntf,mStarRating
  • CrashCrash
    PTIAX, yes indeed.
  • wxman123
    I would still choose PIMIX, and GIBLX (especially as a hedge against a stock market correction).
  • KHaw24
    My update - PTIAX and RCTIX is not available in TRP Brokerage. I am deciding between PIMIX, HSNIX and TRP's own PRSNX...I've owned PONAX in another account and they have receovered well from March 2020 volatility. Next, from what I can see the PRSNX seems to protect better on the downside and it's USD Hedge adds a unique wrinkle. The top performer in the past 3 & 5 years, HSNIX, seems to take the most risk and potentially protect less. Although it came roaring back...
  • Sven
    edited February 2021
    PIMIX had a sizable drawdown in 2020, -11.3% and finally recovered for the year. So the risk aspect is higher than expected. Performance-wise the fund is way way too big and trailed other bond funds for last several years.

    PRSNX had a smaller drawdown and recovered quicker. 2020 was a unusual year where the boring total bond index fund performed quite well. Will see how bonds will do this year with higher inflation, but Fed will keep rate flat for another year.
  • stillersstillers
    edited February 2021
    Look closely at interest rate risk, usually measured by duration. Be wary of anything over 5 years avg duration. It is the reason I left a couple possible bond OEFs off my list.

    Note that PTIAX does not publish its duration. Spoke to them years ago and was told the reason is basically to protect us average investors from ourselves. Interest rate risk is not completely/accurately measured by avg duration and the firm does not want its avg duration to be incorrectly interpreted as a measure of PTIAX's interest rate risk.

    Disclaimer: LT owner of PTIAX and comfortable with whatever avg duration it has, albeit largely unknown.
  • sma3
    M* portfolio lists PTIAX maturities with 30% over 20 years and 20% between 15 and 20 so likely duration is high
  • stillersstillers
    Good point @sma3. Note also that it does hold 40+% munis and they are generally longer duration.

    I don't like to engage in too much of the bond detail stuff, but it is a necessary evil of owning them. For those who do and may need a primer/refresher:

    https://finance.zacks.com/effective-duration-vs-average-maturity-5206.html
  • wxman123
    Sven said:

    PIMIX had a sizable drawdown in 2020, -11.3% and finally recovered for the year. So the risk aspect is higher than expected. Performance-wise the fund is way way too big and trailed other bond funds for last several years.

    PRSNX had a smaller drawdown and recovered quicker. 2020 was a unusual year where the boring total bond index fund performed quite well. Will see how bonds will do this year with higher inflation, but Fed will keep rate flat for another year.

    Pretty much disagree with your take on PIMIX (though I know most share it). The bond market is enormous. While funds having billions in assets can't take advantage of niche opportunities like a very small fund can, most of the funds discussed here are in that same boat. That's OK if what you're looking for in bonds is mostly stability with some decent distributions. Go ahead and compare PIMIX to many of the funds mentioned here back to January 2016. PIMIX still has the highest Sharpe ratio, lowest drawdown and no down years. The same holds mostly true back to 2009 (except PIMIX was down a modest 5.47% in 2008). Hartford strategic may look great now but it suffered a hair-raising 21% drawdown and was also down 17% in 2008. There are no free lunches here. If you want to take on more risk it's simple, a no-brainer really, DHHIX.
  • msf
    PIMIX still has the highest Sharpe ratio, lowest drawdown and no down years

    The following performance graph is from PIMIX's 2009 statutory prospectus. You can take it on faith that this is for the institutional class shares for calendar year 2008 or you can find it yourself on p. 58 of the 21MB prospectus.
    image
  • fred495
    edited February 2021
    Here is what David Giroux, the wunderkind manager of one of the best asset allocation funds, PRWCX, said in a recent M* interview about rising interest rates and duration:

    "So, now, everybody's convinced the yields are going to go up 1% to 2%, but not above 2%. We'll see. 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 really hard to get a really great return. [...] even if rates rose 100 bps over two years, you made zero return. [...] So, 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, just because that skew is so negative on a lot of traditional fixed income. [...] So, this is a time to be short duration in your fixed-income portfolio. [...]"

    Since I basically agree with Giroux's current outlook, I will not invest in "reliable" intermediate core/core plus bond OEFs at this time. Rather, I am using multi-sector OEFs like RCTIX, TSIIX, or even PIMIX, which have excellent risk/reward profiles but durations of less than 3.0.

    This may be off-topic, but I have also been investing in alternative funds like ARBIX, a "market neutral" fund according to M*, that has exhibited a bond-like low risk profile with a SD of 2.97% and a Sortino Ratio of 2.38. Its YTD total return is 1.43% and its 3-year return is a pleasing 6.23%. During the recent market crash, the fund lost 3.1% during the month of March, and over its 3.5 year history its largest monthly loss was 0.38% in November 2018. So far, so good.

    These are very uncertain times and, as another poster said, "with rising interest rates in 2021, it seems that [...] Investment Grade Intermediate bond oefs are struggling". Hence, I have decided to look at other low risk opportunities outside the conventional bond OEF box.

    Good luck,

    Fred
  • wxman123
    edited February 2021
    msf said:

    PIMIX still has the highest Sharpe ratio, lowest drawdown and no down years

    The following performance graph is from PIMIX's 2009 statutory prospectus. You can take it on faith that this is for the institutional class shares for calendar year 2008 or you can find it yourself on p. 58 of the 21MB prospectus.
    image

    MSF, I think you may have misread my comment. I said "Go ahead and compare PIMIX to many of the funds mentioned here back to January 2016. PIMIX still has the highest Sharpe ratio, lowest drawdown and no down years."
    After that I said "The same holds mostly true back to 2009 (except PIMIX was down a modest 5.47% in 2008)." I should have said back to 2008 but the point is the same.
  • msf
    @wxman123 You're right, I read too quickly. My apologies (though the graph is correct and in fact matches your later sentence).

    It's okay to misread to oneself, but I should have been more careful before going further and writing that numbers were different.
  • FD1000
    edited February 2021
    bee said:

    Also, @FD1000 might better explain SVARX (ER around 3%).

    This is mainly a fund of funds. In their top 5 holdings they have IOFIX+BDKNX both expense ratio about 1.5%. Then they use leverage, and they still want to make money.
    The only explanation that I care about is performance which is after expenses + risk attributes(SD, Max Draw, Sharpe, Sortino, others).
    I never invested in SVARX because I do my own trading + going to cash and my performance + SD in the last 3 years is better. My portfolio max loss from any last top was lower than 1%.
  • FD1000
    edited February 2021
    I said several times in the past, PIMIX was a great fund until 01/2018 when I sold it after holding for several years. Since 01/2018 it's still a good fund but performance ranks only at the top 44% according to M*.
    Past performance is important but I'm looking to make a lot more since my portfolio is mainly in bond OEFs. See below performance as of 2-9-2021 sorted by YTD.
    Can you guess where is my money now?
    image
  • davidrmorandavidrmoran
    >> was a great fund until ... I sold it

    love it
  • JD_co
    davidrmoran said:

    >> was a great fund until ... I sold it

    love it

    Never heard of a Fund Whisperer??? They always know just when to sell.

  • davidrmorandavidrmoran
    we are in the presence of the master
  • FD1000
    edited February 2021
    If you are a trader like me and watch momentum you switch. I held PIMIX for about 7 years. I also watch very high risk and why I sold prior to the meltdown last March(link) and bought after it.
    It's also pretty obvious from my table above that PIMIX is way behind the leaders for 1-3 months and what I use for my investments as a trader.
  • Baseball_Fan
    Hey @davidmoran,

    " When the students are ready to learn, the teacher will appear"

    Hmm... I think I heard that on an old kung Fu tv show years back.

    Best of luck to all,

    Baseball Fan
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