I've recently realized that I've become a bond fund collector, compiling 9 bond funds in my current portfolio. They consist of:
Dodge and Cox Income (DODIX) - 15%
Eaton Vance Bond (EVBAX) 15%
PIMCO Income (PIMIX) 15%
Baird ST Bond - (BSBIX) 15%
Principal Global Div Income (PGBAX) 10%
Met West Total Return (MWTRX) 10%
Blackrock High Yield (BHYAX) 7%
Eaton Vance Float Rate (EAFAX) 7%
Riverpark Strat Income (RSIVX) 5%
Any room for consolidation? If so, how would you restructure the bond portfolio? I'm trying to put together a fairly moderate risk portfolio with moderate income. I'm not interested in reaching for yield. Am I missing a particular area of bonds? Thanks in advance for the input.
Comments
Have you done a Instant Xray on what you have? If not, this might be something you might consider doing before making any changes.
I like the fact that you have spread your management risk around among nine funds. In addition you bring nine different perspectives into play rather than just one or that of a few.
In the income area of my portfolio I have a total of twelve funds. Six within my income sleeve and six within my hybrid income sleeve. With this, when one falters there are the others to offer support and continue to propel the sleeve.
Something you might wish to consider and think on.
I wish you the best with whatever direction you choose to venture.
Old_Skeet
For example, the Blackrock High Yield Fund (BHYAX)...4% load and a 0.92 ER. You might be better off in a similar fund such as T Rowe's High Yield (TRHYX)...Higher yield, slightly more duration risk but almost half the ER and no load.
If the former is the case, you would know your target better than we. If the latter is the case, I would be inclined to drop most of the funds and let the managers do their job of finding the right corners of the market to play in.
To that end, I somewhat agree with Art - that a multisector fund such as EVBAX can cover a good portion of the market for you. But multisector bonds tend to leave gaps in their coverage of domestic investment grade bonds, and a wide ranging total bond fund can both fill the gaps and provide management diversification. (For example, EVBAX has virtually no MBS, and FWIW, no inflation-protected bonds.)
You've got a couple of such bond funds - DODIX and MWTRX. I prefer the latter, because it seems to be more flexible. From its willingness to delve into junk when propitious, to its broader range of bond types, it is the more adventurous fund. Both of these funds currently like MBSs. D&C is pretty much split between MBSs and corporate bonds now, following conventional wisdom, as it is wont to do. MetWest has traded a good chunk of corporates for Treasuries (about 2/5 of that in TIPS), taking its own path.
While one might not agree with Treasuries now (I have my doubts), this does show that MetWest has its own ideas, and its record speaks for itself. Despite M* saying it has a similar risk profile (risk ratings, volatility) to DODIX, I tend to think of the latter as more conservative, and perhaps the strongest reason why you might prefer DODIX. Either way, I would eliminate at least one of these.
Aside from EVBAX (multisector funds tend to invest a bit outside the US), the other funds with significant international bond holdings are BHYAX (junk bonds), RSIVX (same emphasis on Canadian exposure as EVBAX, and for that matter LSBDX), and PGBAX. If it didn't have such a high slug of equities (about 1/3), PGBAX would be considered a multisector fund like EVBAX (which also has equity exposure), rather than a conservative allocation fund. It's an interesting fund, but given its bond focus on global junk (35%) and emerging markets (10%), and higher portion of equities, it seems to be even further out on the risk spectrum than Eaton Vance.
To boost international bond exposure (the "tweaking" I mentioned in the first paragraph), I would be more inclined to add a dollop of a pure international fund. The purpose of the fund would be to adjust exposure, so consider its risk in that context. I'm fond of TGBAX (or GIM, its closed end "half brother"). Highly flexible - don't expect to use this to fine tune emerging market vs. developed country exposure - it varies widely here.
If you want to adjust the overall portfolio to reduce risk, I think FPA New Market Income FPNIX can fit the bill. It won't give you high returns, but it also (probably) won't lose you money. Like the other funds I've tended to favor, it is very flexible and also tends to use esoteric types of investments. But also like the other funds I've highlighted, the managers have been there for years and have proven themselves capable of dealing with these securities.
You don't have a single fund I'd dump in isolation. They're all good to excellent. That's what makes selection so interesting.
i do agree that DODIX and MWTRX seem a bit redundant, but I do like their slightly different approaches as you described above.
It likely won't make too much of a difference one way or the other. Looking at the yields, though, I have to wonder whether it might not make more sense to simply ladder CDs for the short end of the portfolio. One could use, say, 18 month CDs, using 5% of the money allocated to short term holdings each month to buy a CD.
For example, GE Capital Bank is currently paying 1.15% on 18 month CDs and will pay out interest monthly if you want it. Trading about 0.15% of yield for not worrying about rising rates seems worth considering. In New York, Doral Bank is paying 1.20% on a 12 month CD, and 1.25% on a 18 month CD (and will also send you the interest if you prefer).
One could open a suite of 5 year CDs at Ally Bank. These pay 1.60%, and have only a 60 day withdrawal penalty (if opened by Dec 7th). If you want to bail after a year, you'll have made about the same yield as with BSBIX (current SEC yield). For any CDs held longer, the yield is greater. That is, unless rates go up - and then one can pay the 60 day penalty and start over (or buy into a short duration bond fund then, without having lost principal). Having multiple CDs would enable you to get money out of one of them without closing all the deposits.
No matter what one does, it's hard to eek out much of a return without giving up a good measure of safety. Any differences in yield or safety among the alternative above are relatively minor (compared with, say, long term bonds).
With respect to TGBAX, try looking at Firstrade. Here's a thread we had on Hasentab's funds that covered buying them.
http://www.mutualfundobserver.com/discuss/index.php?p=/discussion/7271/emglo-debt-funds-michael-hasenstab/p1
Here is my thinking. I too own PGBAX and I have available, to me, HBLIX for purchase. I have also looked at this very same thing. But, decided to keep PGBAX. In review of HBLIX against the otrher hybrid growth & income funds that I own, I still kept what I had. I just felt the dividend payout on HBLIX (2.5%) was too low as compared to AMECX which is a little better than 3.3% according to Morningstar.
I have PGBAX tagged as a hybrid income type fund and HBLIX as a hybrid growth & income type fund. HBLIX has a stock/bond allocation of 47/50 while PGBAX allocation is 33/57. In addition, PGBAX pays a dividend of 4.6% vs. 2.5% for HBLIX. I guess you have to decide which you want ... the fund with the greater income or the fund with the greater ytd retrun as PGBAX ytd is about 5% vs. 10.8% for HBLIX. Five percent ytd return for an income type fund is not bad ... especially when it is derived form global income producing assets. If you want to venture into hybrid global growth & income ... look at CAIBX, IGPAX and TIBAX. These are the three funds that I own in this area. I am sure there are other good funds besides these.
No dobut, PGBAX & HBLIX are both good funds.
Old_Skeet
Hi Old_Skeet,
I'm more concerned with total return rather than yield so HBLIX would fit into my plans nicely even with the lower yield. The other issue I have with PGBAX is its positioning if interest rates rise. I think it would be hit harder than HBLIX if rates rise. Just my opinion of course. Of the two, HBLIX has a slightly better SD and Sharpe ratio over a three-year period.
TIBAX also interests me, but I cannot access it through Fidelity without an up front load (4.50%). Bummer. The same goes for CAIBX and IGPAX.