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Alternatives to core bond funds

This is a spinoff from this thread -- https://www.mutualfundobserver.com/discuss/discussion/64663/core-bond-fund-replacement#latest where a suggestion was made (which I agree with) to continue alt discussion in a new thread.

Comments

  • edited October 4
    In the above referenced thread, @FD1000 kindly educated me as per below.
    FD1000 said:

    stayCalm said:

    Where is the actual data that supports your contention that QDSIX has dropped 7% in 2024/25?

    See the chart (https://schrts.co/pWNKwfaP)

    I looked at a 3-year chart so it looked like 7%. It's actually closer to 6% but still more than your DD=4.8

    If you use PV for YTD (https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=10eBW4hM7DguW80JelVpf8)
    MAX draw = -1.37.

    For SP500 max draw = -7.58. In reality SPY lost about 19% from peak to trough.
    See (https://schrts.co/WPhBIdSe)

    I hope you learn something new.:-)

  • edited October 4
    Here are my observations

    - The SD metric incorporates daily price movements. No need to manually pore over individual price charts imo
    - Selective cherry picking of dates for unclear reasons. I.e. A 3 year chart of QDSIX is being looked at alongside YTD charts for SPY (no idea why SPY even entered the picture in a discussion for bond funds but anyway..)
    - My suggestion of QDSIX as a candidate for replacing a standard bond fund (such as BND) was initially explained as per below
    stayCalm said:

    To me the label of Bond fund is less relevant than whether it has served the function of a bond fund. I.e. Decent return and low max dd. With that frame, here are some funds that have returned 7% or higher during the last 5Y with a drawdown of 3% or lower.

    CEDIX, 15.6, 2.4
    VFLEX 10, 2.1
    LCTIX 7.4, 2.5

    as compared to
    CBLDX 6.1, 1.4
    PFIIX 4.5, 7.3
    PAIIX 2.6, 8.9

    The last two would be no-go's for me with those performance and max dd numbers.

    Subsequently I proposed QDSIX too (in response to a question asked by a forum member) with justification as per below
    stayCalm said:

    Here is the direct QDSIX to BND compare
    https://www.portfoliovisualizer.com/fund-performance?s=y&sl=3hYp9dTgZx25fW564h0zrq

    Key take-aways
    CAGR of 12.59% vs. -0.43%
    MaxDD 4.45% vs. 17.54%
    Sortino 2.85 vs. -0.64

    Short story is that QDSIX has blown the lights out of BND across various time periods since inception in 2020 at significantly lower volatility.

    And finally, in response to the selective cherry picking of dates by @FD1000 (Note: I never proposed QLEIX to be a substitute for a bond fund, I have no idea just like SPY why QLEIX entered the picture in a bond fund thread but anyway..).

    3Y (10/1/22 to 09/30/25) Return & Risk Stats of QLEIX, QDSIX
    CAGR: 13.41, 32.55
    SD: 6.62, 8.39

    Is QLEIX CAGR a lot better than QDSIX for above time period for comparable risk? Sure, I think that is a reasonable argument to make

    But zoom out to the inception to date performance of QDSIX (July 2020 to Sep 2025) as compared to QLEIX and the numbers are
    CAGR: 12.59, 24.84
    SD: 6.5, 12.05
    MaxDD: 4.45, 15.98

    In short, I don't see QLEIX is a replacement for QDSIX but YMMV. I certainly see QDSIX as a strong replacement for BND but I ack the comments from others that QDSIX is a young fund that has not been battle tested.
  • edited October 4
    Monthly data is utilized for Portfolio Visualizer analyses
    while daily data is incorporated in Portfolio Backtester analyses.
    Consequently, results will vary.

    Portfolio Visualizer generated the following results for QDSIX, QLEIX, and QMNIX respectively¹.
    CAGR: 12.59%, 24.84%, 18.14%
    Max. Drawdown: -4.45%, -15.98%, -10.52%
    Sharpe: 1.42, 1.68, 1.28
    Sortino: 2.85, 3.63, 2.66
    https://www.portfoliovisualizer.com/backtest-portfolio?s=y&sl=4yoNaAO46AdhkOrEsxJKG2

    Portfolio Backtester generated the following results for QDSIX, QLEIX, and QMNIX during the same period.
    CAGR: 11.97%, 25.11%, 18.37%
    Max. Drawdown: -7.06%, -17.07%, -14.05%
    Sharpe: 1.16, 1.91, 1.51
    Sortino: 1.57, 2.79, 2.20
    https://testfol.io/?s=4JX16KUrEm3


    ¹ Jul. 2020 - Sep. 2025 (constrained by available data for QDSIX).
  • I very much appreciate low volatility and limited potential for drawdowns. So with 5% to 7% per annum being my target, I've been setting up the following bond alt sleeve:

    IRA:
    PAPIX - Option trading
    ARBIX/ARBOX - Hedged Equity
    HMEZX - Merger Arb
    BUYW - Option income

    Taxable acct:
    BALT - Wealth Defender - Defined outcome ETF (capped)
    ALLW - SPDR Bridgewater All-Weather ETF (Ray Dalio)
    PSFF - Buffered FOF
    PRPFX

    It will be interesting to see if it gets me there. Expecting a market test at some point to see how it floats.
  • @JD_co. Big fan of PRPFX here. Have it in both taxable and retirement accounts. My question is on what data are you placing ALLW in taxable accounts? Seems like turnover might be part of the plan. Lots of gains that would be taxable?
  • @Observant -- tks for pointing out a key diff between PV and PB regards max dd.

    Adding BND to your analysis results in following stats for the same dates
    CAGR: -0.37%
    DD: 18.58%

    So at least for this 5 year stretch, QDSIX would have been a fantastic proxy for BND.
  • Portfolio Visualizer (PV), Morningstar and MFO Premium use MONTHLY returns as their inputs, so the details within the month are hidden/lost.

    TestFol and Stock Rover use DAILY returns as inputs, so their MPT stats are different - typically higher/worse due to higher volatility captured.

    I did try PV and TestFol for QDSIX, but it didn't resolve the DD issue. Problem was that due to volatility, TestFol restarted DD clock multiple times based on daily data while the DD period in PV didn't change and was longer. So, the result was counterintuitive - TestFol had LOWER DD than PV (typically, it's just the opposite).

    As the previous thread was going off the main topic, I didn't want to introduce new factors by posting, but this is a NEW thread.
  • edited 10:42AM
    larryB said:

    @JD_co. Big fan of PRPFX here. Have it in both taxable and retirement accounts. My question is on what data are you placing ALLW in taxable accounts? Seems like turnover might be part of the plan. Lots of gains that would be taxable?

    We shall see, thanks for pointing this out. ALLW distributes annually with 12-31 ex-date.

    Per their website:
    "Despite investing in commodity-linked derivatives, the fund does not issue a Schedule
    K-1 as the fund holds the commodity-linked derivatives through a wholly-owned Cayman
    Islands subsidiary to minimize non-qualifying income."

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