This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Short-Term Bond ETFs Stay Afloat

Lord Abbett currently has 40% of assets in corporate bonds, including a stake in high-yield issues, which are rated below-investment grade. The managers shift allocations as conditions change. Most often, the moves have been on target. During the past five years, the fund has returned 7.0% annually, outdoing 95% of short-term funds.

As markets began reaching a trough in 2009, the Lord Abbett portfolio managers began buying riskier commercial mortgage-backed securities. Those are based on loans for commercial properties, such as office buildings and malls. Before the financial crisis, investment-grade commercial mortgages had been considered sound investments that only yielded a percentage point more than Treasuries. Then, as defaults rose, prices of the mortgages crashed, and investors demanded yields that were 14 percentage points over Treasuries.

Lord Abbett grabbed high-quality mortgages and scored big gains as the market recovered. The portfolio still has 16% of assets in commercial mortgage-backed securities. "Commercial mortgage-backed securities suffered huge dislocations in 2008, and they still represent relative value," says Lord Abbett portfolio manager Stephen Hillebrecht.

The fund has 20% of assets in high-yield bonds. Those have delivered big gains as default risk has declined and prices rebounded up from the lows. The Lord Abbett portfolio managers limit risks by focusing on bonds that are rated BB and B, the two highest grades in the below-investment grade universe. The fund also emphasizes bonds with maturities of one and two years. Those have suffered relatively low default rates. With the economy growing and interest rates low, companies have been able to refinance debt before they run into trouble.

At the time of publication the author had no position in any of the stocks mentioned.

Must Read: [video] Bond ETFs Buyers Should Keep It Short and Sweet in 2014

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Stan Luxenberg is a freelance writer specializing in mutual funds and investing. He was executive editor of Individual Investor magazine.
2 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
VCSH $79.67 -0.05%
BIV $84.78 -0.36%
AGG $109.38 -0.37%
SCPB $30.54 0.00%
GS $180.70 2.08%


Chart of I:DJI
DOW 16,776.43 +304.06 1.85%
S&P 500 1,987.05 +35.69 1.83%
NASDAQ 4,781.2640 +73.4890 1.56%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs