On August 1, Fidelity took direct aim at index fund competitors Vanguard, Blackrock’s iShares ...
Not Your Grandfather's Bond Fund
10/19/2015 9:00 am EST
Against a backdrop of near term uncertainty, I thought it best to invest alongside one of the best fixed-income managers on the planet to assist in navigating through the next few months, suggests Bryan Perry, income expert and editor of Cash Machine.
To that end, I am adding a closed-end fund—DoubleLine Opportunistic Credit Fund (DBL)—to our Conservative High-Yield Portfolio.
Jeff Gundlach, the renowned founder, CEO, and Chief Investment Officer of DoubleLine Funds, is one of the most trusted names in the industry.
The fund falls into a newer breed of what are called “unrestricted bond funds.” Its objective is to seek high total investment return by providing a high level of current income and the potential for capital appreciation.
With these as its two primary objectives, the fund may invest in debt securities and income-producing securities of any kind.
With this pick, this fund manager seems to be pulling the right levers for risk-adjusted returns that deliver very attractive yields and preservation of capital.
Within the past 12 months, with all the gyrations endured by investors trying to stay in lockstep with a fickle Federal Reserve, Gundlach and his management team have turned out a solid +13.34% total return.
In second-quarter 2015, the fund produced a 1.24% gain in net asset value (NAV) when the 10-year Treasury yield jumped from 1.8% to 2.4%.
This is proactive bond management at its best, with its NAV posting an annualized return of 9.74% since inception (January 26, 2012).
At present, the fund owns 213 positions, with roughly 92% of capital invested in asset-backed bonds; additional holdings in reverse repos, unrated securities, and 14% structured leverage are how the lofty 8.22% current yield is manufactured.
This is not your grandfather’s bond fund for sure, and, like any actively managed fund, there is risk of principal loss, especially if interest rates spike for some unforeseen reason that catches the market off guard.
But Team Gundlach has demonstrated adroit skill in managing this fund so well in the past year, experiencing only 22% turnover.
With the financial world bracing for higher interest rates, I’m comfortable buying DBL at this time.
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