In examining the 24 funds chosen as winners of the 2007 Business Week/Standard & Poor's Excellence in Fund Management Awards, we've explored the list's large- and all-cap winners, its mid- and small-cap champs, and its international picks and fixed-income standouts. In this installment, we'll look at some more of the fixed-income winners that the Business Week report highlighted.
Intermediate-term bond champs
The first of the five winners in Business Week's intermediate-term bond category was the Dodge & Cox Income fund. This fund, featuring a long-tenured team of nine portfolio managers at the helm, focuses on higher-quality fixed-income securities, including U.S. government obligations, mortgage- and asset-backed securities, corporate bonds, and collateralized mortgage obligations. Everything I like to see in a top-notch bond fund is found here -- low expenses, low turnover, a team-managed process, and a solid performance record. Get on board before the folks at Dodge & Cox close this fund, too.
The Harbor Bond Fund, run by Bill Gross of PIMCO fame, shares a spot among the intermediate-term bond winners. Besides investing in the standard corporate and government securities, this fund's mandate includes the ability to invest up to 30% of the portfolio in non-U.S.-dollar-denominated assets and up to 10% of assets in emerging-market bond securities. Since the fund's inception in December 1987, it has ranked above the median of the intermediate-term bond category in every single calendar year except two, an amazingly consistent track record. Of course, any fund that relies on a single "superstar" manager always gives me pause, but in this particular case, Gross has done an admirable job of managing this fund over the past 19 years, and he has a very strong depth of talent at PIMCO from which to draw on. The bottom line here: Harbor Bond is truly one of the better fixed-income funds in the market today.
Second-best bond funds
Julius Baer Total Return, which invests in both domestic and foreign bond securities, is the third winner in this category for 2007. The fund currently sports corporate-bond holdings from Coors Brewing (NYSE: TAP ) , Cisco (Nasdaq: CSCO ) , and Abbott Labs (NYSE: ABT ) among its line up, along with its U.S. Treasury and agency holdings. Lead manager Richard Pell has run the fund since July of 1998 and is assisted by co-manager Donald Quigley, who's been on board since 2001. Overall, this isn't a bad bond fund, but I'm a little turned off by the inconsistency of its performance. The fund has beaten the benchmark Lehman Brothers Aggregate Bond Index in only five of the past 10 years. And when we compare it with a group of its peers, we see the fund has bounced from the top quartile to the bottom quartile and back again year after year. This translates into a little more year-by-year volatility than I'd prefer to see in a core bond fund. Better options are out there.
Metropolitan West Total Return Bond is run by a team of four portfolio managers, three of whom have been with the fund since its 1997 inception. This fund invests primarily in fixed-income securities with a duration of between two and eight years, and it typically keeps to the upper end of the credit-quality spectrum. Performance here has been pretty consistent, and it looks favorable, with one glaring exception. The fund stumbled badly in 2002, hurt by some bad corporate picks, and it trailed the Lehman Aggregate Index by more than 11% that year. That one blemish, however, is minimized by an otherwise decent performance track record, low expenses, and knowledgeable and long-tenured management team. Not my top fixed-income pick, but it's an all-around decent offering.
Lastly, the Managers Bond fund rounds out our look at the intermediate-term bond category. This fund, run by Daniel Fuss of Loomis, Sayles since 1984, sticks to holding domestic corporate and government issues, and it clocks in with a fairly low annual turnover rate of 46%. Expenses here are the highest of our fixed-income finalists, but that has not detracted from a winning long-term track record. The fund has ranked in the top quartile of intermediate-term bond funds every calendar year since 2001, and it has also made it there seven more times between 1985 and 2000. This is a worthy option for those seeking a domestic core bond fund.
On deck in the final installment of this series: the final fixed-income champs, and a look at a winning real estate fund.
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Fool contributor Amanda Kish lives in Rochester, N.Y., and hopes she lives to see the day when either the Buffalo Bills win the Super Bowl or the Buffalo Sabres take the Stanley Cup. She's not greedy -- one or the other will suffice. Amanda does not own shares of any of the companies or funds mentioned herein. The Fool has a disclosure policy.