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I own Thompson bond fund, a short term fund that has lost 10.8% so far this year. I always thought short term funds wouldn't lose as much in a downturn but that clearly is not the case. Does anyone have any ideas as to why this is losing so much? This has been a great fund for many years but is really disappointing. All my other bond funds were up today but this was down another .97%. Thoughts?


  • Hi jimlenz

    You didn't pick a bad fund in normal market conditions, but; for the most part only bond funds with an overweight in AAA gov't. issues have fared "decently". And even the gov't. issues had problems for awhile.
    This link is a composition view at Fidelity. Scroll down a bit to find "credit quality". About 69% of the holdings are rated BBB or lower. BBB is the edge of limited quality depending upon the quality of the issuing company. Example: Ford Motor has a boat load of BBB that is on the edge of higher quality "junk bond" rating.

    The overview, for the most part, IMHO; is that cash flow to corporations is a big question mark going forward, which may impair many companies ability paying down debt. The Treasury, supposedly, is going to support some of this debt one way or another. How much this helps remains to be seen; and in particular how long economies are affected by the COVID-19 circumstance.
    My two cents worth.
  • edited March 25
    Good link catch22. I see to the fund has most of its assets in BBB, which I believe is the lowest level of Investment Grade (IG) bonds. The Fed backstop has helped stabilize the IG market, but I fear companies (and their debt) may get downgraded in weeks ahead, which means funds like this may need to sell downgraded assets, probably at a discount. I'm beginning to think this scenario could present systemic-risk to corporate bond funds right now, especially open-ended ones. Another example of liquidity risk. FWIW.
  • I appreciate the insight. Sounds like this may keep going down and time to pare my position.
  • @Charles , I'll place this again.

    A quick look at S&P's bond rating guide:

    "AAA" and "AA" (high credit quality) and "A" and "BBB" (medium credit quality) are considered investment grade. Credit ratings for bonds below these designations ("BB," "B," "CCC," etc.) are considered low credit quality, and are commonly referred to as "junk bonds."

    A possible concern remains that S&P and Moody's will downgrade the bond ratings of some companies. This depends, of course; with how long economic problems persist.

  • edited March 25
    Nothing special about this fund. It went down just like many others. According to M* It's duration=1.6 is shorter than most and it's in 90+% IG bond rating but over 80% is invested in Corp+MBS bonds.
  • THOPX has had excellent long term returns and typically has low volatility. However, during periods when high yield bonds suffer, it can also drop much more than many short term bond funds. This also happened in 2016, but it bounced back well the following year. If you continue holding it, I’m confident it will rebound in time.
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