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I'm not very familiar with BINC so I can't comment on fund similarity. It may be worthwhile to consider the following three multisector bond funds.
River Canyon Total Return Bond Fund - Institutional (RCTIX) Intrepid Income Fund - Institutional (ICMUX) CrossingBridge Low Duration High Income Fund - Institutional (CBLDX)
Because drawdowns are a consideration for you, for diversified multisector bond funds I like ESIIX and CUBIX. Although not the same kind of fund as BINC, I like EGRIX, which is a global macro absolute return bond fund. It also has had relatively low drawdowns and has had good returns.
@Observant1, why did you sell River Canyon Total Return Bond Fund RCTIC?
I was looking at Vanguard Multi-Sector Income Bond VMSAX. It looks nice a nice fund, but it had a fairly big drawdown in April (about the same as PIMIX).
@Observant1, why did you sell River Canyon Total Return Bond Fund RCTIC?
Not Observant, but I also used to own RCTIX. It underwent manager changes a few years ago, the performance started to suffer, and there seemed to be some uncertainty. So I sold it. It later improved and recovered. The fund is 55% securitized. When I was thinking about getting back into the fund, I saw that SYFFX, a securitized fund, was outperforming RCTIX. SYFFX outperforms RCTIX at every trailing period I look at. So if I when considering RCTIX, which has more than 50% exposure to the securitized sector (a sector I was underexposed to), I thought that I might as well go with a dedicated securitized fund that has performed better.
Several names mentioned are not really multisector bond funds. Some are core-plus, ST-HY, global HY, nontraditional bond funds. So, keep this in mind when comparing Drawdowns, SD, Sharpe Ratios.
Multisector category includes sovereign bonds, corporates, HY and EMs in a single package. Some follow allocation ranges rigidly (FADMX), some act like go anywhere funds, so may look quite different at times (PONAX / PIMIX).
IMO, a combination of mostly core-plus bond fund and some multisector bond fund cover lot of bond territory.
"IMO, a combination of mostly core-plus bond fund and some multisector bond fund cover lot of bond territory."
I agree. But I'm considering possibly replacing my core-plus bond fund (DOXIX) with a dollar-hedged global bond fund (PGBIX) sometime in the future. https://testfol.io/?s=4XrGJnvG9lB
Just be aware with securitized (MBS) funds.....SYFFX lost -31% in 1Q 2020, as many of these funds were crushed at the time. That's why I don't hold more HOSIX.
Just be aware with securitized (MBS) funds.....SYFFX lost -31% in 1Q 2020, as many of these funds were crushed at the time. That's why I don't hold more HOSIX.
It's not that history will repeat, but it can.
Good observation. I normally don’t look further than 5 years (and place more emphasis on 3 year returns), and don’t look at individual quarters that far back. so I probably would have missed that. That is also something to consider.
It would be a good idea to examine drawdown periods as @Obervant1 noted with various multi-sector funds and ETFs for their risk. Using MFO Premium, one can compare these funds for their MFO rating and Risk over 3 years and 5 years period. In general, MS funds carry higher risk than that of investment grade bonds. I have short term investment bonds to compliment my MS and high yield bonds.
SYFFX has a large chunk in junk-rated fare (at least right now), while other securitized funds like DHEAX and SEMRX are overall investment grade. At this point I'm emphasizing IG in that category and taking a bit more risk in international funds. In Pimco-land, I've held PYLD off and on since inception and consider it a good MS fund.
With securitized debt borrowers typically have some control over payment schedules. See "prepayment risk" and "extension risk" in prospectuses. The bottom line is that this affects convexity, often leading to negative convexity (especially for longer term debt) that can make bonds behave badly at the worst times.
With normal bonds (positive convexity) as interest rates increase, prices decrease but at a decelerating rate (tempers bad effect of rising rates). And when rates decrease, prices increase at an accelerating rate. But bonds having negative convexity exhibit the opposite behavior. As interest rates increase, prices decline at an accelerating rate. And as interest rates decrease, bonds usually still appreciate but at slower and slower rates.
This negative convexity is one reason why securitized debt tends to yield a bit more than other forms of debt. And like investing in general, risk tends to be rewarded over time if you wait long enough. But in the interim, one can take severe hits. That's what makes me nervous. So I'll consider multisector bonds where the manager has the flexibility to adjust allocations as seem appropriate, but I don't invest in securitized debt funds.
Here's a BrandywineGlobal paper from 1½ years ago discussing convexity and securitized debt, along with market conditions at the time and risks involved in four types of securitized debt. Riding the Convexity Wave in Securitized Credit
Here's a BrandywineGlobal paper from 1½ years ago discussing convexity and securitized debt, along with market conditions at the time and risks involved in four types of securitized debt. Riding the Convexity Wave in Securitized Credit
Thank you for the link. Yet another reason I try to minimize exposure to securitized debt is because I don't understand things like the following from the link cited:
Risks: If the job market worsens significantly along with a hard landing, subprime auto ABS bond defaults may increase sharply. However, we believe the potential credit losses should be absorbed by the cushion provided by credit enhancements and the fast deleveraging of the deal structure.
"Fast deleveraging of the deal structure" sounds like Repo Man II: The Action Movie to me. But I know I don't know what I'm talking about. .
If they cut rates in September it will be interesting to see how the mid to longer end of the curve behaves and then how managers like Rieder respond. Over $1M invested. Thank you for the suggestions.
Comments
BINC is in iShares/BlackRock universe and there are also similar cousins.
Vanguard has VGMS and cousin VMSIX / VMSAX.
Fido has rather tame FADMX.
It may be worthwhile to consider the following three multisector bond funds.
River Canyon Total Return Bond Fund - Institutional (RCTIX)
Intrepid Income Fund - Institutional (ICMUX)
CrossingBridge Low Duration High Income Fund - Institutional (CBLDX)
I've previously owned RCTIX.
-CBLDX (Crossingbridge)
-APDPX (Global unconstrained)
-HOSIX
-NRDCX (Crossingbridge - Nordic fund) is an interesting add
-DHEIX - short-term HY.
This mix should maintain a very low SD, if recent history is any indicator.
I was looking at Vanguard Multi-Sector Income Bond VMSAX. It looks nice a nice fund, but it had a fairly big drawdown in April (about the same as PIMIX).
I sold RCTIX due to an abrupt manager departure.
https://www.mutualfundobserver.com/discuss/discussion/comment/147655/#Comment_147655
Multisector category includes sovereign bonds, corporates, HY and EMs in a single package. Some follow allocation ranges rigidly (FADMX), some act like go anywhere funds, so may look quite different at times (PONAX / PIMIX).
IMO, a combination of mostly core-plus bond fund and some multisector bond fund cover lot of bond territory.
I agree.
But I'm considering possibly replacing my core-plus bond fund (DOXIX)
with a dollar-hedged global bond fund (PGBIX) sometime in the future.
https://testfol.io/?s=4XrGJnvG9lB
It's not that history will repeat, but it can.
I recall when IOFIX and SEMMX were touted as being "cash subs."
Both of these funds subsequently generated significant losses during Q1 2020.
https://www.mutualfundobserver.com/discuss/discussion/comment/150158/#Comment_150158
These days I'm starting to look at how bond funds performed in the Great Recession as well as 2022.
With normal bonds (positive convexity) as interest rates increase, prices decrease but at a decelerating rate (tempers bad effect of rising rates). And when rates decrease, prices increase at an accelerating rate. But bonds having negative convexity exhibit the opposite behavior. As interest rates increase, prices decline at an accelerating rate. And as interest rates decrease, bonds usually still appreciate but at slower and slower rates.
This negative convexity is one reason why securitized debt tends to yield a bit more than other forms of debt. And like investing in general, risk tends to be rewarded over time if you wait long enough. But in the interim, one can take severe hits. That's what makes me nervous. So I'll consider multisector bonds where the manager has the flexibility to adjust allocations as seem appropriate, but I don't invest in securitized debt funds.
Here's a BrandywineGlobal paper from 1½ years ago discussing convexity and securitized debt, along with market conditions at the time and risks involved in four types of securitized debt.
Riding the Convexity Wave in Securitized Credit