6 Funds That May Defy Bond-Market Downturn
Pimco Total Return Institutional Fund (PTTRX), the world's largest bond fund, with $237 billion in assets and managed by Bill Gross.
Morningstar gives it its highest rating of five stars.It's hard to beat its three-year average annual return of 8.1% in a bond fund, but it's off to a slow start this year with a return of 0.57%. It has gained 7.3% over the past year. The fund seeks maximum total return. It invests at least 65% of its assets in a diversified portfolio of fixed-Income instruments of varying maturities. Its current top holdings include a variety of Treasury notes and Fannie Mae bonds. A Morningstar analyst writes that the manager sometimes moves early on inflation risk, "but Gross has protected the fund well from rising-rate spikes, and he has room to react if he sees rising yields on the horizon."
Loomis Sayles Investment Grade Bond Fund (LSIIX), which is top-rated by Morningstar with five stars, is a good all-around bet for investors seeking a conservative bond allocation. It has gained 1.5% this year, 10.5% over the past year, and has a three-year average return of 7.7% -- and that was through some rough and rocky times. The fund, with $4.4 billion in assets, invests at least 80% of total assets in investment-grade fixed-income securities and can invest up to 10% of the fund in higher-yielding, lower-rated securities. The fund may invest up to 20% of total assets in foreign securities, including emerging-markets securities. It doesn't hold any equities. Among its largest holdings are government bonds from Canada, New Zealand and Norway and corporate bonds from Intel (INTC) and Deutsche Telekom (DT).
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