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A review of fixed income funds, which for this post includes funds that invest in government or corporate bonds, loan stock and non-convertible preferred stock. This type of fund has been getting considerable attention lately on MFO with a growing concern that investors could be lulled into false sense of security.
To recap a little from Mutual Funds That Beat The Market - Part 1, there are about 1880 funds of this type, of which 30% have actually delivered higher life-time returns than the SP500, and more importantly and relevant, 98% have beaten cash.
In the tabulation below, purple means the fund was a top performer relative to T-Bill over its life time, blue represents highest Sharpe (if not already a top APR), and yellow represents worst performing APR. I included other notables based on David's profiles, numerous suggestions in the various threads by MFO readers (bee, catch22, claimui, fundalarm, hank, Hiyield007, Investor, johnN, MaxBialystock, MikeM, Mona, msf, Old_Joe, scott, Shostakovich, Skeeter, Ted and others), and some of my own interest.
A reminder that I only used oldest share class, so for popular funds like PONDX, you will find PONAX, similarly MAINX is MINCX, etc.
Here's the break-out, by fund inception date:
- Every fund listed (5 years or older) with current yields of 6% or more, lost more than 20% of its value in 2008, except three: PIMCO Income A PONAX, which lost only 6.0%; TCW Total Return Bond I TGLMX, which lost only 6.2% (in 1994); and First Eagle High Yield I FEHIX, which lost 15.8%.
- In fact, of all fixed income funds more than five years or older that have current yields of 6% or more, nearly 3 out of 4 had a down-year of 20% or more. Those yielding 5% or more did not do much better. For what it's worth, the break point appears to be between 4 and 5%. Funds with less than 4% current yield did much, much better. Here is summary:
- Just glance over the list...you will see that PIMCO has produced many top performing fixed income funds.
- Fortunately, again, nearly every fixed income fund existing today has beaten cash over its life time, some 98%. The 44 funds with negative Sharpe actually fall into two distinct categories: First, those with negative Sharpe, but positive life-time APR. These are generally funds with short duration and/or tax exempt funds. Second, those with negative Sharpe and negative life-time APR. There are 25 such funds, but it's reassuring to find only 3 older than three years old, which presumably means fixed income funds that actually lose money don't stay around very long. The three enduring poor performers, tabulated below, are: AMF Ultra Short AULTX, SEI Instl Mgd Enhanced Income A SEEAX, and WisdomTree Euro Debt EU.
Both AULTX and EU have less than $10M AUM, but SEEAX is fairly substantial AUM at $170M, which is simply hard to believe...
For those interested, I've posted results of this thread in an Excel file Funds That Beat The Market - Nov 12.