NEW YORK ( TheStreet) -- Bond funds have been struggling. The average intermediate-term fund dropped 1.9% during the past month. Rising interest rates have caused the losses. When rates climb, bond prices tend to fall. Is it time to start trimming your bond holdings? Some top-performing fund managers think so. These managers oversee balanced funds, which hold mixes of stocks and bonds. Lately the funds have been lowering their allocations to fixed income.The shift by the managers is worth considering because the funds have all shown deft timing in the past. During the stock downturn of 2008, the managers moved into fixed income, helping to protect shareholders. All the funds finished in the top quarter of Morningstar's moderate allocation category for the past five years. The strong performers include Franklin Income (FKINX), Madison Diversified Income (MBLAX), Villere Balanced Fund (VILLX) and Westwood Income Opportunity (WWIAX).
Villere says that in the past month interest rates on 10-year Treasuries rose from 1.7% to 2.2%. That caused the bond prices to fall by 4%. "People who bought 10-year Treasuries a month ago have already lost two years' worth of interest," he says.