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PRSNX - Trow Price Strategic Income Fund

edited January 2013 in Fund Discussions
I think this fund is much misunderstood fund on fund forums.
If you just look at the past performance, your would observe that it is lagging behind usual favorites in this space, LSBRX, FSCIX, RPSIX, etc. However, I think this fund takes lower risk compared to other multi-sector bond funds and accordingly, its returns are lower. In its short life (3 years), it has better alpha and equal or better sharpe ratio among these 4 funds.

Just wanted to bring it to your notice.

Comments

  • edited January 2013
    Howdy mrc70,

    There are many very complex funds within all sectors. But, in my opinion; attempting any type of straight forward comparison among multi-sector bond funds is an ultimate challenge.
    If one would choose to have 25% or more of a portfolio in this sector; and has access to numerous funds, this sector is deserving of 3-5 funds; which would create a most diverse multi-sector fund. Three to five funds may also smooth the ride; as any one of these funds is apt to have an off year, while the others maintain. Lots of flavors to choose from in this area.

    We currently have the following, which in some shape or form are some type of multi-sector bond fund in varying degrees: PTTRX, LSBDX, FTBFX, FSICX, PONDX, DPFFX
    There is sector overlaps somewhere among these; but that is not a concern for our house, and the mix changes each and every day.

    For the below list, you may click onto the headers for 1 yr, etc. to form a return % listing.

    The list is wide ranging. Enjoy.

    Multi-Sector bond funds list

    Regards,
    Catch

  • An indication of how varied the category of multisector bond funds is, consider that while M* considers LSBDX a multisector bond fund, Lipper classifies is as a Corporate Debt BBB fund. (It's not allowed to invest more than 20% in foreign bonds or equity, with the exception of Canadian bonds.)

    Regarding the risk/reward profile - I would invest in a multisector bond fund for the return, not the risk mitigation. It's a high risk type of bond fund. The three year standard deviation of the M* category is 5.12, or about double that of intermediate term bonds (2.75). So while PRSNX has low volatility for its category, it's nevertheless a risky (read volatile) fund in the broader universe of bond funds.

    Even when considering risk/reward, there are other metrics. M*'s star ratings, as much as they seem to be maligned here, serve as a good scorecard of past risk/reward. If one buys into M*'s definition of risk (which weights downside risk more heavily, unlike the metrics you mentioned), one sees that PRSNX is a 3* fund. Not saying that this a prediction of how it will perform (or what risk it will take on) in the future, just looking at past numbers.

    I use 3* funds (I even owned a 1* fund for decades - M* conceded its fine performance, but bemoaned its volatility). So I'm not saying that one should avoid low star-rated funds. Rather, if one is risk averse, but still wants to dabble in multisector funds, PRSNX seems like a good option.
  • edited January 2013
    I agree with msf, T. Rowe Price Strategic Income (PRSNX) is a good choice.

    Of the others mentioned and based on M* list catch provided, here are alternatives I like the most (I already own RNSIX), oldest to youngest:

    PIMCO Total Return Instl (PTTRX)
    T. Rowe Price Spectrum (RPSIX)
    Osterweis Strategic Income (OSTIX)
    Neuberger Berman Strategic Income I (NSTLX)
    PIMCO Income D (PONDX)
    RiverNorth Doubleline Strategic Inc I (RNSIX)
    Angel Oak Multi-Strategy Income Instl (ANGIX)

    And, summary of life-time performance and risk:

    image

    All minimize down-side risk, while offering good returns and yields. All are no-load.
  • PRSNX: My take is yes, it's not a bad choice. It is not, strictly speaking, a fund of funds, but I see that it does own rather much of OTHER TRP funds. It's like adding a 5th wheel to your car, no?
  • Max,

    PRSNX is not a fund of funds, that is RPSIX, the spectrum income fund.

    Coming back to the intent of my original post, I have seen some posts in the past, both here as well as at M*.com, that denigrate this fund in comparison with other Multi-sector bond funds, perhaps for wrong reasons. It has low volatility and probably better diversifier than for example LSBRX. IMO, if your allocation to these bond funds go from your bond allocation, it is better to invest in low volatile, lower risk M-Sec bond funds. However, if you are investing in these as substitute for some stock allocation, as some retirees suggest on these forums, then I understand the reason to invest in funds like LSBRX (taking it as example for high risk M-Sec bond fund; I am not against this fund).
  • Actually about 32% of the fund is in other Price bond funds. That's neither bad nor good. It is just how the fund is run. As another poster noted, it is darned hard to compare funds in the go-anywhere bond group. We use BSIIX, LSBDX, OSTIX, and GSZIX, but there are a number of other acceptable options. Catch22 suggested that you should try to own a mix that covers a broad swath of (mostly) domestic fixed-income. I agree.
  • edited January 2013
    Deleted - Sorry wrong thread, have to post this in 401k thread.
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