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Bond Investors: Heed Warnings About Rise In Rates

2. PIMCO UNCONSTRAINED BOND (PUBAX)

This fund is in Morningstar's nontraditional bond category and employs a complex strategy using derivatives, such as swaps and futures, to help offset rate risks and reduce volatility. The approach produces a low average duration that's often slightly negative, known as a "short" position. The fund's duration was recently negative 0.4 years, providing ample protection against higher rates.

3. FPA NEW INCOME (FPNIX)

This low-cost fund is also in the nontraditional bond category and it seeks to deliver modestly positive returns after inflation. In fact, it hasn't posted a loss in any year since 1984. Its average duration was recently 1.4 years.

4. OSTERWEIS STRATEGIC INCOME (OSTIX)

This multisector bond fund emphasizes bonds with low durations to protect against rate risks. It recently had an average duration of 2.3 years, about half the average for its category. Its focus on high-yielding corporate bonds helps keep yields high, while its emphasis on short-term durations limits risks from rising rates.

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Questions? E-mail investorinsight(at)ap.org

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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