NEW YORK (
) - TheStreet Ratings initiates coverage of four open-end bond mutual funds that accrued a sufficient track record of risk and performance data by the end of April 2010. None of the four begin with initial grades in the 'buy' or 'hold' range. All four of these newly rated bond funds with inception dates of April 2007 are initially ranked at 'sell'.
Being rated just one notch below the 'hold' range at D+,
American Independence U.S. Inflation-Indexed Fund
, outperformed its freshmen class peers over the three years ending April 30, 2010 with a total annualized return of 7%. The fund returned 10.7% over the one year period. Those are before a 4.25% front load which cuts into any potential return.
fund is sub-advised by fixed-income specialist FFTW, or Fischer Francis Trees & Watts, a wholly-owned subsidiary of
. The fund's $107.9 million portfolio of U.S. Treasury Inflation-Indexed Securities has a duration of 7.65 years.
ING BlackRock Inflation Protected Bond Portfolio A
, with an initial rating of D, followed a similar strategy to a three year annual return of 5.3% and a one year return of 9.8%. Unlike American Independence, this ING BlackRock fund also invests in inflation protected debts of foreign governments such as Germany and France. This European exposure may also explain some of the underperformance.
The last two funds play both sides of the high yield corporate bond sector by utilizing high yield securities, credit default swaps, and futures contracts. Rated at D, the bullish
Rydex Series - High Yield Strategy A Fund
earned an annual rate of 3.2% for three years and 28.1% in the year ending April 30. The bearish
Rydex Series - Inverse High Yield Strategy A Fund
lost 8.1% annually for three years and a whopping 26.7% over the same one year period. While the rating for this inverse fund can't go any lower than E-, if high yield corporate bonds continue to perform, investors in this fund can lose more money.
-- Reported by Kevin Baker in Jupiter, Fla.
Kevin Baker became the senior financial analyst for TheStreet Ratings upon the August 2006 acquisition of Weiss Ratings by TheStreet.com, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.