No. of Recommendations: 0
From the morningstar article:

""Silver-rated Baird Short-Term Bond (BSBIX) is guided by an experienced team that stays within its guardrails. The fund is run duration-neutral to its Bloomberg Barclays 1-3 Year Index benchmark, but the team has historically added value through thoughtful portfolio construction. Holdings are diversified across numerous names and sectors. In 2018, half of the fund’s portfolio was parked in corporate credit, a fourth in U.S. Treasuries, and the remainder in asset-backed securities, cash, and a sliver in taxable municipals. Around a third of the portfolio was rated BBB, but the team side-stepped difficulties in this sector. The fund delivered 1.5% and landed in the top quartile of its category (distinct peers) for 2018.

Bronze-rated American Funds Short-Term Bond Fund of America (RMMGX) also benefited from guardrails, but a different type. The fund’s index, the Bloomberg Barclays Government/Credit 1-3 Year ex Baa Index, is similar in maturity to the indexes of other recommendations mentioned here, but the team aims for a higher-quality portfolio with the explicit intention of providing ballast over performance boost during periods of stress. As of December 2018, a typical short-term bond fund held around 68% of its holdings in A or higher rated credits. This fund held nearly 100% in this credit tier, including a 45% slug in U.S. Treasuries. The fund won’t always hold this large a Treasury stake, but it is structured to exhibit defensive characteristics during credit downturns, and in 2018, the 1.4% return of its R6 shares signaled just that. In particular, most of that impressive relative performance was generated as credit sold off aggressively in the last two months of the year, when this fund outstepped 85% of distinct peers.

Bronze-rated FPA New Income (FPNIX) has a long history of shining when bond yields are on the rise, and 2018 was no exception. In the past, this fund’s broad flexibility landed it in the nontraditional bond Morningstar Category, but given that the managers won’t take duration negative, coupled with a mostly investment-grade focus and persistently low duration, the fund was moved to the short-term bond category in mid-2018. As of December 2018, the fund’s holdings were composed of highly rated securitized fare, including collateralized mortgage obligations (13%), commercial mortgage-backed securities (4%), and agency mortgages (around 18%). Half of portfolio holdings were in various flavors of asset-backed securities (auto loans, credit card debt, collateralized loan obligations, and so forth) that the team extensively stress-tests. In contrast to the two previously mentioned funds, this portfolio held a modest 6% in corporate credit, and this contributed to its attractive relative performance. The fund generated 2.3% for 2018, ahead of 95% of distinct category peers for the period.

Bronze-rated JPMorgan Limited Duration Bond (HLGFX) is benchmarked to the Bloomberg Barclays 1-3 Year Index, but unlike this bogy and in the same mold as FPA New Income, this fund explicitly focuses on securitized holdings. Similar to its aforementioned peers, the fund tilts to higher-quality holdings. As of December 2018, the portfolio held 12% in corporate credit, with the remainder of the portfolio parked in collateralized mortgage obligations (39%), asset-backed securities (26%), commercial mortgage-backed securities (7%), agency mortgage-backed securities (4%), and short-term cash equivalents. This portfolio is a relative outlier in the category, given its limited exposure to corporate debt, but the team supporting this fund has exhibited skill in selecting securitized structures in the past, and this year it proved particularly beneficial. These sector holdings, coupled with the fund’s shorter duration, buoyed the its return to 2.0% for the year--better than 95% of distinct category peers.

Emory Zink does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.
Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.