Barron’s has selected three bond funds to help protect investors against rising interest rates amid anticipation of Federal Reserve rate hikes next year.
The funds are BrandywineGlobal High Yield BGHAX, Pimco Long-Term Credit Bond (PTCIX) - Get PIMCO Long Term Credit Bond Inst Report (open only to institutional investors), and Invesco Rochester Municipal Opportunities (ORNAX) - Get Invesco Rochester Muni Opps A Report.
The Fed indicated earlier this month that it will end its bond buying program in March, and the median forecast of Fed officials calls for three interest rate increases next year.
The Brandywine fund has an effective duration of 3.01 years, below the four-year duration of its benchmark index, Barron’s reports. Duration measures sensitivity to interest-rate changes. The lower the duration, the lower the sensitivity.
The Pimco fund has a duration of 14.27 years, one-half year shorter than its benchmark, according to Barron’s.
Morningstar analyst Mike Mulach praises the Brandywine fund.
“This strategy moved to Brandywine Global from Diamond Hill in July 2021, but BrandywineGlobal High Yield’s distinctive, disciplined, and high-conviction approach continue to make it a uniquely attractive proposition within the high-yield bond Morningstar Category,” he wrote in September.”
Morningstar gives the Pimco fund its top gold rating. “A strong management team and sound investment process underpin” the fund, says an autogenerated Morningstar commentary. But it complains of high fees, with a 0.59% expense ratio.
As for the Invesco fund, “the combination of a middling process pillar score and a weaker people pillar score limit [it] to a Morningstar quantitative rating of neutral,” said an autogenerated Morningstar commentary.
“The team's lower-than-average manager retention rate raises concerns about stability and continuity.”