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OSTIX, PONDX, PTIAX or ?

expatsp
in Fund Discussions
This is really a follow up on puddnhead's thread, for money I'll probably need not in 6 months but in 2 years. I'd like to be in bonds since I'm overweight equities already.

These bond funds, OSTIX, PONDX, PTIAX all seem great, but I'm leaning toward OSTIX because...
a) lower AUM than PONDX
b) longer track record (including Great Recession) than PTIAX.

Flaws in my logic? Other suggestions? My account is with Schwab, where these funds are all NTF. I don't have the 100K minimum here for institutional share classes.

Comments

  • catch22catch22
    edited June 2017
    Hi @expatsp

    Well, they are different bond types, eh?
    I recall that OSTIX evolved away from a more common multi-sector bond fund into a high yield bond fund about 3 or 4 years ago. The most current report indicates 67% high yield corporate and about 22% cash or equivalents.
    PONDX , since its inception was more targeted towards mortgage related holdings, but continues to evolve into areas found more desirable by management. This fund continues to use the "magic sauce" of whatever derivative tools deemed appropriate to hedge their bets. I'm personally comfortable with the apparent skills of management, at this time.
    I'm not familiar with PTIAX and its past holdings or history, but find current reported majority holdings to be mortgage related, as well as taxable and non-taxable muni bonds.

    http://stockcharts.com/freecharts/perf.php?PONDX,OSTIX,PTIAX&n=1708&O=011000

    A 3 year view of the above 3 funds:

    http://stockcharts.com/freecharts/perf.php?PONDX,OSTIX,PTIAX&n=755&O=011000

    High yield compare: OSTIX and ARTFX

    http://stockcharts.com/freecharts/perf.php?OSTIX,ARTFX&n=816&O=011000

    If I stepped into this bond world of these 3 choices without prior knowledge, I would have to rely, in part; to the above graphic of total returns for the time period.

    My money would go to PONDX .
    'Course, one could also do an even split among the three.
    My 2 cents worth.....

    Regards,
    Catch
  • MikeMMikeM
    My money would be (and is) with PONDX. I followed the herd into PONDX years ago when I believe bee first started talking about it here at MFO (thank you bee:) ). I was in PTIAX for a while, but because of it's heavy reliance on Munis which is reflected in it's good past performance, I decided to pull out and use only PONDX as my core bond fund. I'm just not sure Munis is the place to be going forward. I also believe there is no better bond manager than Ivascyn fwiw.

    And at this point I like what I see with the PONDX management moving more into International and EM bonds. I don't think the other 2 funds you mentioned are following that money trail. The huge AUM has not been a draw on returns - so far.

    PONDX - OSTIX - PTIAX would be the order of choice IMHO. But all seem to be good core holdings.
  • AndyJ
    edited June 2017
    Another lens is to look at them as far as credit and rate sensitivity go (and what you think might happen to those categories of reward:risk over your holding period). They're pretty different on those metrics.

    OSTIX is almost entirely credit sensitive; It's basically a low duration high yield fund, with not a lot of surprises -- a good play on high yield, usually slightly on the junkier side.

    PONDX plays on both sides of the street, and the Ivascyn crew has been really adept, especially lately, figuring out how to do that successfully. And they do it with a yield that's plenty generous for the risks.

    PTIAX is mildly rate sensitive overall, and the only one of the three that, given its current and historical construction, would be a reliable, if partial, offset to an equity downturn. The credit risk is entirely in non-agency mortgages, mostly legacy mortgages as I understand. The barbell pairing of munis and non-agency mortgages has been a pretty decent balance for reward: risk; a mild equity hedge with a yield over 5% is unique as far as I'm aware.

    All said & done, just IMHO, looking at a 2y horizon, I'd go 50-50 PONDX-PTIAX.

    P.S. What Catch said about Pimco's use of tools most other bond managers don't use (e.g., swaps, options) ... I think that's a reason to be somewhat less concerned than you might normally be about AUM.
  • MikeM2
    FWIW it have 10% of my net worth in PCI/PDI (49yo) and my mother's account has 13% in PONDX/PIMIX(retiree). A vote of confidence in the PIMCO team. Both tax deferred IRA accounts although she is taking RMDs.

    The funds mentioned will likely kick off large amounts of income so there is a tax hit to consider. Or not, depending on your situation/state. Being in NJ I have a TRowePrice NJ Muni bond fund to avoid taxes on non retirement accts. Have considered closed-end Muni bond funds too.

    FWIW I also vote PONDX.
  • Mona
    With a 2-year time horizon I would go with Pimco Income and if you have $25,000 to invest, I would open a Brokerage Account at Vanguard to purchase institutional shares (PIMIX). There is a 34 basis point difference in the expense ratio between PONDX and PIMIX.
  • Edmond
    edited June 2017
    I own PONDX (PIMIX) and PTIAX.

    I've avoided OSTIX, despite its admirable record/returns, as it seems to be junk-focused --- and with corporate credit-spreads so tight, that just is not a place I am personally interested in being right now. Besides the spreads being tight, junk does have a high correlation to equities. So if we enter turbulent times for equities, junk proxies will likely swoon in sympathy. Moreover, the Fed seems to be on a path to yield curve inversion.

    Its true PTIAX currently emphasizes munis taxable and tax-free. OTOH, PIMIX has some EM exposure. In the case of both funds, I am relying on management to navigate through the fixed-income landscape. PTIAX in particular, due to its (relative) diminutive size, should be nimble enough to move in/out of sectors with some aplomb.

    My current bond OEF strategy is to give prominet positions to PIMIX & PTIAX, with some 2dary emphasis to DBLTX and PMZDX. Those latter 2, both mortgage-centric, I view as more defensive than the former two.

    Equities are not cheap. Bonds are not cheap. So which OEF of the 3 to choose may depend on which bond sector you view as "least worst" -- junk (OSTIX), munis (PTIAX) or EM (PONDX). Pick your poison!
  • msf
    edited June 2017
    Mona said:

    With a 2-year time horizon I would go with Pimco Income and if you have $25,000 to invest, I would open a Brokerage Account at Vanguard to purchase institutional shares (PIMIX). There is a 34 basis point difference in the expense ratio between PONDX and PIMIX.

    I would use Vanguard, but I invest for the long term. Over two years, after taxes, this would save someone about eighty bucks. Not chickenfeed, but not a king's ransom either. Depends on how much you value your time and effort. (I'll walk an extra 1/2 mile to save 25 cents on a bottle of soda - but I also benefit from the exercise - the 25c is just an added bonus.)

    Increased yield: $25K x 0.34% x 2 years x 75% = $127.50 (25% tax bracket)
    Increased cost: $35 to buy, $20 to sell = $55 x 85% = $46.75 (15% tax savings on reduced cap gains)

    Net after tax gain by using Vanguard: $80.75

  • MikeM2
    https://www.wsj.com/articles/pimcos-new-bond-king-is-nothing-like-bill-gross-1497605409
  • expatsp
    Thanks, all. Lots to think about. You've made me realize, for a start, how little I know...
  • carew388carew388
    It seems to me OSTIX has a transaction fee at Schwab. IIRC funds like OSTIX, MAPOX, FPNIX and DODIX always have a transaction fee at any brokerage.
  • TedTed
    edited June 2017
    @MFO Members: In a 4/28/17 interview with M*, Dan Ivascyn had this to say about Pimco Income Fund size. "So, we've been pleased that we've been able to maintain performance during this period of growth. If we get into a situation where we feel that growth is limiting our ability to provide good value to clients--when I talk about value it's not just return, it's risk-adjusted returns--we'll consider steps to reduce those inflows. But we're nowhere close to that point currently. But it's something that if necessary we will certainly do.
    Regards,
    Ted
  • davidrmorandavidrmoran
    tnx
  • expatsp
    @carew388. You're right, OSTIX has a transaction fee at Schwab, don't know how I missed that. I'm sorry @BobC hasn't chimed in, I know he's a fan of OSTIX.
  • BobCBobC
    Yes, I am a fan of OSTIX, a big fan of Carl Kaufman and his team. OSTIX does have a transaction fee because Osterweis funds refuses to pay Fidelity, TD, Schwab, or anyone else the extra fees. It helps to keep the asset base down, which is a good thing. We use OSTIX as a core hold in most accounts for its ability to go where and when it wants, with very little volatility and risk. Duration around 1.3, current yield around 5%. Please don't look at OSTIX as another high-yield fund. It isn't. We don't worry about this fund in terms of tightening corporate spreads since its average maturity and extremely short duration have proven its ability to withstand prevailing winds.

    PONDX is also a good fund. We would use it in our more aggressive fixed-income allocations.

    PTIAX is not something we would use now because of its rather long maturity. We are focusing on short maturity with shorter durations.
  • expatsp
    Many thanks, @BobC, I knew you'd have useful insights. I like everything I see about OSTIX, just haven't been sure why...
  • ShostakovichShostakovich
    @BobC - what do you think of the new bond guy they brought on at Osterweis (Valatu?)?

    Also, any insight as to what's behind their adding funds in the past couple of years when the performance of their stock / AA funds has been a bit lackluster?

    Thanks.

  • MikeMMikeM
    FWIW, PFIDX (low duration income fund) is another PIMCO fund co-managed by Ivascyn that I've been using. Similar return over the past year as PONDX with 1/2 the duration and maturity. Similar foreign allocation also. I don't know if this fund will bode well or better than PONDX during interest rate hikes. We'll find out I guess.
  • expatsp
    @MikeM PFIDX looks interesting for my needs. Despite the low duration, it fell far more than PONDX in 2008-9... BUT Ivascyn wasn't managing it then. It might like a good way to get Ivascyn with a tiny asset base.
  • JoeD
    Yeah, that -25% drop in 2008 for PFIDX vs. -5.8% for PONDX would give me pause, even if Ivascyn recently started co-managing PFIDX.
  • PRESSmUPPRESSmUP
    If you didn't want to worry about your choice for the next 2 years, there's this...a 2 year note at 1.364%:

    http://www.marketwatch.com/story/treasury-yields-climb-as-stocks-oil-lure-bidders-2017-06-19
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