56 KIPLINGER’S PERSONAL FINANCE^ 05/2017INVESTING
PIMCO INCOME D
The focus: Steady income generated
by a variety of bond types.
The process: Dan Ivascyn and Alfred
Murata divide the go-anywhere fund
into two parts: One invests in high-
yielding bonds, such as non-agency
mortgage-backed securities and
emerging-markets debt, that should
perform well in a strong economy; the
other holds high-quality debt, includ-
ing Treasuries, that should rally in a
weak economy. The fund yields 3.5%.
The track record: Income’s double-digit
one-year gain was notable. Even more
impressive: In its nine full calendar
years of existence, the fund has landed
in the top 20% of multi-sector bond
funds seven times.VANGUARD HIGH-YIELD CORPORATE
The focus: Junk bonds (debt rated
double-B or lower).
The process: Manager Michael Hong,
who works for Wellington Manage-
ment, tilts toward higher-quality junk
and likes to buy and hold. Hong favors
firms with stable free cash f low and
strong balance sheets. “It’s all about
avoiding losers,” he says. The fund
yields 4.7%.
The track record: This fund often lags
in strong markets, as was the case over
the past year. But it shines when junk
bonds are under pressure. Over the
past 10 years, High-Yield Corporate
landed in the top third of its group.VANGUARD SHORT-TERM
INVESTMENT-GRADE
The focus: A diversified blend of mostly
short-maturity, high-quality bonds.
The process: Manager Gregory Nassour
doesn’t have much wiggle room to ad-
just maturities, so most of his tweaks
involve the mix of bond types. These
days, corporate bonds make up 62% of
the fund’s assets. The fund yields 1.9%
and has a duration of 2.6 years.
The track record: Over the past year,
Short-Term nearly doubled the returns
of the Agg index. Over the past five
years, it outperformed 84% of taxable,
high-quality short-term bond funds. ■FIDELITY NEW MARKETS INCOME
The focus: Bonds issued by govern-
ments and firms in developing nations.
The process: Longtime manager John
Carlson currently holds 80% of the
fund’s assets in dollar-denominated
debt, mostly in government bonds
(about half of assets) but with a healthy
slug in predominantly state-owned
energy companies. With a yield of
5.9%, New Markets is the highest-
paying fund in the Kip 25.
The track record: Our best-performing
bond fund over the past year, New
Markets beat 93% of its peers.METROPOLITAN WEST
TOTAL RETURN BOND
The focus: Medium-maturity, invest-
ment-grade bonds.
The process: With $78.1 billion in as-
sets, this is the nation’s biggest ac-
tively run bond fund. Its four manag-
ers have more than half of the fund’s
assets invested in fortress-strength
bonds: Treasuries and mortgage bonds
and bundles of student loans backed
by the government. Another 20% is in-
vested in investment-grade corporate
bonds. The rest is in a mix of asset-
backed securities not backed by Uncle
Sam. The fund yields 1.9% and has an
average duration of 5.6 years.
The track record: Met West squeaked
past the Agg over the past year. Over
the past five years, it beat 90% of tax-
able medium-maturity bond funds.up with pure stock funds in a power-
ful bull market. Since 2006, when
Bousa and lead bond picker John
Keogh were first paired, Wellington
has returned 7.7% annualized, outpac-
ing 96% of similar funds.BOND FUNDSDOUBLELINE TOTAL RETURN BOND
The focus: An intermediate-term bond
fund that mostly holds mortgage-
backed securities.
The process: Jeffrey Gundlach and
Philip Barach balance government-
guaranteed mortgage-backed securi-
ties with non-agency mortgage-backed
securities. The former carry virtually
no credit risk but will fall in value as
interest rates rise. The latter come
with more credit risk but relatively
little interest-rate risk. The fund’s av-
erage duration, a measure of interest-
rate sensitivity, is 4.1 years, implying
that if rates were to rise by one per-
centage point, the fund would lose
roughly 4% of its value. The fund
yields 3.4%.
The track record: Total Return trailed
the Bloomberg Barclays US Aggregate
Bond index by a whisker over the past
year. Since its inception in 2010, the
fund has topped the Agg by almost
three percentage points per year.FIDELITY INTERMEDIATE
MUNICIPAL INCOME
The focus: Bonds that pay tax-free
interest income.
The process: Lead manager Mark Som-
mer and two comanagers search for
value in muni sectors with stable fi-
nances, such as issuers of general obli-
gation debt and health care revenue
bonds. The only tax-free fund in the
Kip 25, Intermediate Muni yields 1.9%,
which is equivalent to 3.4% for some-
one in the highest federal tax bracket.
The track record: Donald Trump’s elec-
tion and its implications for higher in-
f lation and lower income-tax rates led
to a sell-off in muni bonds late last
year. The Fidelity fund essentially
matched its group over the past year.