Looking for another fund somewhat like RPHYX to fill a conservative part of portfolio

prinx

Looking for another fund somewhat like RPHYX to add to the conservative part of my portfolio.

Both FFRHX and LSFYX are both floating rate funds but there is a large difference in return.
Would appreciate if there are some comments on the contents of LSFYX that makes it have this greater return.
There must be a greater risk content in LSFYX.
prinx




Symbol Fund Name 1 Wk 13 Wk YTD 1 Yr 3 Yr (Annualized) 5 Yr (Annualized)
FFRHX Fidelity Float Rate HI 0.25% 1.40% 1.22% 5.79% 5.08% 5.75%
RPHYX RvrPrk:Sh-Tm HY;Rtl 0.10 0.86% 0.71% 4.06% -- -- --
LSFYX Loomis Sayles:SFR & FI; Y 0.28% 2.17% 1.85% 9.45%

prinx

Charles

PIMCO Short Asset Investment Fund, “D” shares (PAIUX) reviewed by David February 2013

Investor

If you must have a similar but slightly longer duration fund, take a look at STHBX or SSTHX (if you find it load waived, a few basis point cheaper)

AndyJ

If you mean something else in the short junk line, have a look at OSTIX ... mainly short junk + busted convertibles, 2-3y duration, 5%-ish yield, lost 5% in 2008. It's conservative within the universe of HY and HY-emphasizing multi-sectors.

Hiyield007

I went in two floating rate funds recently NFRIX and PSFIX. I may be mistaken but thought the Fidelity Floating rate fund was closed unless your account was at Fidelity. These funds have been steady as a rock YTD as investors anticipate rate increases somewhere down the line.

Hiyield007

Reply to @Investor: Don't you think a floating rate fund would be better than a short term junk bond fund? I mean if the inevitable ever occurs, rising rates, and junk bonds finally take a hit, the short term junk funds will follow them lower just as they always have in the past. And in that scenario, the floating rate funds would simply continue their march steadily higher. Plus, YTD the return on STHBX is identical to RPHYX so why even bother to switch. Just food for thought and would like to hear your comments as always.

JoeNoEskimo

How about adding a conservative allocation fund like EXDAX or USCCX.

MWCRX is interesting as well, but DLSNX is most conservative.

Also, another S/T HY fund is ASHDX, though its going to be more volatile than the steadier RPHYX that you own.

msf

People (including myself, to some extent) seem to regard River Park Short Term High Yield (RPHYX) as an enhanced cash fund. That means that it is expected to have good (but not perfect) price stability, superior yield to a MMF, and a portfolio not constrained by Rule 2a-7 (essentially 60 day/13 month maturity restrictions).

Bank loan funds don't seem to come close to this ideal. Just look at the huge price drop in 2008, even for FFRHX. (Admittedly, several funds marketed as enhanced cash funds, notably Schwab Yield Plus, failed miserably also.) So I don't see bank loan funds serving as an alternative fund.

As to why the Loomis Sayles fund has a much higher yield than the Fidelity Fund, several factors pop out: LS credit rating is somewhere between B and CCC (60% of fund rated B, nearly half the rest is lower), vs. BB for the Fidelity fund (higher than most bank loan funds); LS can hold fixed rate securities (longer effective duration, or equivalently, more interest rate risk); LS can use leverage.

Finally, note that the SEC yield between the two funds is smaller than the TTM (trailing twelve month) yield difference. SEC yield is yield that takes into consideration total return - if you buy a bond at a premium (above face value), then it gradually declines in price (NAV) over time. So the total returns are somewhat closer than you may think (though there's still quite a difference between the funds).

In the muni arena, BobC has suggested NEARX. I'm not quite as sanguine about this fund as he is, but I'm happy to acknowledge that it's worth a serious look. (You didn't say whether you were looking for a taxable or tax-sheltered account.)

As I've written before, I like FPA New Income (FPNIX) as a conservative bond fund, but it too is unlike RPHYX. It is certainly not positioned as an enhanced cash fund.

fundalarm

Reply to @Hiyield007: nope. most floaters have a floor nowadays; they need a jump in rates of 4% or so to start reinvesting higher. HY is partially correlated to equities and short term high yield will get you where you need to go just like the floaters would.

Investor

Reply to @Hiyield007:

Good question. Unfortunately hard to answer. Here are the thoughts I have. Floating rate funds are obtained by companies that are typically in low credit ratings or they are in a rush to raise funds so they cannot do a normal bond offering in time. Assuming most are low credit rating companies, if they were to offer high yield bonds, they need to offer substantial interest on those bonds. So, they get these floating rate loans from banks at a slightly lower interest but bank loans are the most senior in credit structure. So, the loans get paid first before bond holders. Bank in turn put them in portfolios and sell them to investors much like mortgage bonds are bundled. Floating bond funds buy these assets...

Floating rate funds may return well in an increasing rate environment since duration is short. They are typically steady just like you like but in a liquidity crisis market might disappear and they lost a lot in 2008.

Short term junk bonds are actually very similar to floating rate bond. Shorter term will allow the fund to hold bonds to maturity and new bonds purchased will be at a higher rate as rates increase. However, they will be longer duration than bank loans so they might be slightly more volatile (except RPHYX has comparable low duration)

Secondly, high yield bonds are a proxy for equities. The high yield bond prices have higher correlation with that of the company stock. If interest rates are rising due to the increased expectations better future for the economy, then the company is expected to do better and credit outlook of the company might improve. So, while you might lose a bit on the duration (but still small due to short term nature of above fund) but you may make up some on the credit side and pocket the yield for the period as return. Even if credit quality appreciation does not occur, the Fed will be lifting the interest rates very very slowly and they control the short end of the yield curve more precisely. So, duration based effects will be very very little on these bonds.

In short, which one is better? It is hard to say for sure.

Investor

Reply to @Hiyield007: In general Fidelity funds are only available through Fidelity. They may be available in some non-Fidelity retirement plans. If they are available in a brokerage, they are typically TF or limited to advisors (so it shows up closed in their listings to Individual Investors). So, that may be why you are seeing closed. It is not closed at all.

Similar situation exists for TRP and Vanguard funds available through other brokerages. They just don't pay the other brokers to offer them as NTF.

Fidelity prefers to collect money from other to have their funds available at Fidelity fund supermarket instead of paying others.

msf

Reply to @Investor: TRP Investor class shares appear to be available NTF at TDAmeritrade.

Fidelity funds appear open and available (TF) at TDA, Schwab, Scottrade, and likely elsewhere. For years, there seems to have been a special arrangement with Muriel Siebert & Co (Siebertnet), where you could get Fidelity funds (including Fidelity Advisor funds) NTF there. It also appears that you can get the institutional (no load) share class of Fidelity Advisor funds (albeit with a TF) through Vanguard, e.g. New Insights I FINSX - Danoff's Fidelity Advisor fund.

Vanguard seemed to change how it sold its own funds 1-2 years ago. It used to be that you could get Admiral shares though most brokers that carried Vanguard; now it seems only Investor class shares are available through these third party brokers.

None of this contradicts your statement that TRP, Vanguard, Fidelity, etc. don't pay to play. The brokers offering the funds NTF may be absorbing the cost (my guess; I don't know for certain.)

Hiyield007

Reply to @msf: You got me curious on Fidelity at Scottrade. Apparently Fidelity has two entirely different floating rate funds. One is a dog - FFRHX - and is available. The other is top of the heap - FFHCX - and the one I tried to purchase last week but closed via Scottrade.

Investor

Reply to @msf: Thanks for pointing to alternative NTF availability for TRP, Fidelity.

Investor

Reply to @Hiyield007: Fidelity 'Series' funds are internal funds created by Fidelity to serve other funds. Those are not accessible to the general public. That is why it is listed closed. It is not even offered to public...

FFRHX has higher quality exposure than FFHCX. i.e. FFHCX is junkier. That is making the difference in returns.

prinx

Thank you all for this very valuable discussion.
prinx

BobC

Why not hire a manager who decides what the 'best' place is? I confess I am not smart enough to make these decisions. We would rather let the folks at Osterweis, Loomis, BlackRock, Goldman and others allocate for us. It could be very dicey to be in any bond fund that concentrates on just one bond sector. And I certainly would not use something like a floating rate fund as a cash substitute. If you want something like that, consider a plain vanilla short-duration option. Vanguard, AmCentury, U.S. Global, and others have some ok options.

Dave

Consider RiverPark Strategic Income (RSIVX) - Same manager, slightly more 'adventurous', slightly better return , and from what I've seen so far, not too badly subject bond volatility. The per/share price just goes up (due to Capital Gains?), with the exception of two mid-month penny dips and adjustments for its monthly dividend.

edit: I'd like to note that RSIIX, normally a $1Million minimum, is available at Schwab as a for-fee ($76/buy,$0/sell) fund with a $2,500 minimum ($1000 minimum in an IRA). And no short-term holding fees. The Institutional shares (RSIIX) have an expense ratio 0.25% less than RSIVX, making the one-year break even about $30,400.

For the MFO review, see http://www.mutualfundobserver.com/2014/01/riverpark-strategic-income-fund-rsivx-january-2014

And this months commentary ( http://www.mutualfundobserver.com/2014/03/march-1-2014 ) It's half-way down... Search (Ctl-F) for 'RSIVX'

For more info on David Snowball's take on it, see: http://www.mutualfundobserver.com/discuss/discussion/comment/36261/#Comment_36261

[ Long both RPHYX (for my monthly/annual needs) and RSIVX/RSIIX for my near-out years. ]