Advertisement
investing

Kiplinger 25 Update: Tepid Gains in a Hot Bond Rally

Jeffrey Gundlach says DoubleLine Total Return Bond has done well so far, but falling rates are causing slight bumps in the road.

The strategy behind DoubleLine Total Return Bond (symbol, DLTNX) fund is simple. The fund's managers, led by Jeffrey Gundlach, invest in a blend of government-agency mortgage-backed securities and non-agency mortgage-backed bonds. The two types of bonds balance each other in terms of risk: Government mortgage debt carries no default risk but a lot of interest rate risk (interest rates and bond prices tend to move in opposite directions); non-agency mortgage-backed bonds have little interest rate risk but higher default risk. Since it launched in April 2010, the fund has outpaced all but four of its peers—funds that focus on intermediate-term bonds—with lower volatility.

The past year has been business as usual for the fund, a member of the Kiplinger 25,with one small change. Gundlach and his comanager, Philip Barach, promoted analyst Andrew Hsu to comanager. Hsu has been a member of Gundlach's team for years. "Andrew knows the portfolio inside and out," says Gundlach.

Advertisement - Article continues below

But the bond market has been a bit unusual. High-quality corporate bonds, a sector Total Return Bond doesn't own, gained 13.7% through the first eight months of 2019, nearly as much as the broad U.S. stock market. "That's interesting and also weird," says Gundlach. Corporate debt makes up 25% of both the Bloomberg Barclays U.S. Aggregate Bond index and the typical intermediate-term bond fund. As a result, Total Return Bond's respectable 7.5% gain over the past 12 months lags the 10.1% gain in the Agg index and trails 88% of its peers.

Advertisement
Advertisement - Article continues below

Falling interest rates in 2019 posed another problem for Total Return Bond. By early September, the 10-year Treasury yield had dropped a whopping 1.14 percentage points. Falling rates have pushed bond prices higher—good news for bond investors, especially holders of government debt. But Gundlach likes to keep Total Return Bond's duration, a measure of interest-rate sen­sitivity, below that of the Agg index. In late summer, the fund had a 3.5-year duration; the Agg, by contrast, had a 5.3-year duration. "Given the Total Return construct, I think we've performed quite well," Gundlach says.

Advertisement

Most Popular

12 Tax Deadlines for July 15 (It's Not Just the Due Date for Your Tax Return)
tax deadline

12 Tax Deadlines for July 15 (It's Not Just the Due Date for Your Tax Return)

Between due dates for IRA or HSA contributions, paying estimated taxes and other deadlines, there's more to do by July 15 than just filing your federa…
July 10, 2020
65 Best Dividend Stocks You Can Count On
stocks

65 Best Dividend Stocks You Can Count On

These 65 Dividend Aristocrats are an elite group of dividend stocks that have reliably increased their annual payouts every year for at least a quarte…
July 8, 2020
Tax Changes and Key Amounts for the 2020 Tax Year
tax law

Tax Changes and Key Amounts for the 2020 Tax Year

Americans are facing a long list of tax changes for the 2020 tax year...and it's never too early to start thinking about next year's return.
June 22, 2020

Recommended

13 Best Vanguard Funds for the Next Bull Market
mutual funds

13 Best Vanguard Funds for the Next Bull Market

Optimistic that the bounce since March is indeed the start of the next bull market? Here are the 13 best Vanguard funds to help you make the most of i…
July 7, 2020
15 Best Fidelity Funds for the Next Bull Market
mutual funds

15 Best Fidelity Funds for the Next Bull Market

Investors looking to squeeze more profit from the next bull run can look to Fidelity funds for strong active management and tactical investments.
July 7, 2020
10 Stocks to Invest in the Health Care Revolution
healthcare stocks

10 Stocks to Invest in the Health Care Revolution

These companies are fighting disease and improving our standard of care.
July 2, 2020
Cash In With This Gaming ETF
Technology

Cash In With This Gaming ETF

Cash in on the video gaming craze with this fund.
July 1, 2020