The credit markets are so vast that notwithstanding the bloody numbers for 2022, I figure someone, somehow, somewhere must be breaking even or in the plus column managing fixed-income funds. And I found such a guy. Fittingly, David Sherman shares the name of the legendary World War II tank, for he is in the vanguard of an onerous trench battle against relentless forces: inflation, recession, the Federal Reserve and everything else bent on destroying bond values.
Sherman is commander-in-chief of a platoon of actively managed, short-term, high-yield bond funds with the RiverPark and CrossingBridge insignias. The flagship is RiverPark Short-Term High Yield (symbol RPHYX), unfortunately closed to new investors. The fund is 1.4% in the green this year through October 7, yields 2.5% and has never had a losing calendar year since its launch in 2010. Among other Sherman vehicles, three CrossingBridge funds—Ultra Short Duration (CBUDX), Low Duration High Yield (CBLDX) and Responsible Credit (CBRDX), with an environmental, social and governance focus—are newer and much smaller. Each is offered as “institutional,” which means you need $50,000 to invest. Their 2022 returns range from minus 0.4% to plus 0.8%. And for a minimum of $2,500, there is RiverPark Strategic Income (RSIVX). It is down 3.5% through October 7, but its monthly distributions give it a yield of 5.3%, and its overall record since 2013 is excellent. That 3.5% loss compares well to similar funds with losses on the order of 8%.
How active fund managers earn their keep
The best of these results still trail risk-free Treasury bills and money market funds. And some active fund managers who stand out during a bear market are just plain lucky. But a talk with Sherman and a look at these funds has me convinced he has found a way to generate high and rising monthly income distributions on the order of 6% with less danger to principal than most types of bond funds.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
RiverPark Short-Term High Yield has a duration (a measure of interest-rate sensitivity) of 0.46 with a portfolio that yields 6.1% to maturity. I know of similar funds with roughly the same yields but durations of 3, which means that they stand to forfeit more than twice the capital that the RiverPark fund does should overall interest rates go on rising. Sherman is constantly buying and rolling over undervalued ultra-short junk and BBB-rated bonds and preferred shares. Many holdings are in energy, insurance, utilities and health care, which have minimal risk of defaulting. Typical investments have a 6% or higher coupon, are due to mature in a year or so, and cannot be called or refinanced.
Few of us have the knowledge to identify or buy this stuff on our own. But one drawback of these or any other boutique, research-driven portfolios is that the cost of analysts and traders falls across a small asset base; RiverPark Strategic Income has just $186 million in assets, so its expenses are 1.18%. That’s partly why the minimum to invest in several of these funds is $50,000.
But 2022 shows that managers like Sherman are worth considering when lower-cost index funds or those that hew, herd-style, to a benchmark are a recipe for 10% losses.
-
Market Fees Could Be Costing You — Here’s How to Avoid ThemSome money market accounts charge more than they earn. Here's how to spot costly fees and choose smarter savings options.
-
The Role of a Mortgage Underwriter in Buying a HomeFrom fast-track approvals to manual reviews, here’s what to expect (and how to avoid delays) in the underwriting process.
-
Can President Trump Fire Fed Governor Lisa Cook?Markets hate uncertainty, especially when it comes to monetary policy and interest rates, and questions about the Fed are compounding.
-
Powell Signals Rate Cuts in His Jackson Hole Speech. Here's What Wall Street is SayingIn his speech at the Jackson Hole symposium Friday, Fed Chair Jerome Powell said current conditions "may warrant" rate cuts.
-
Trump-Era Regulations Will Broaden Access to CryptoThe Kiplinger Letter The president wants to make the U.S. the leader in digital assets.
-
July CPI Report Boosts Rate-Cut Odds: What the Experts SayThe July CPI report shows that tariffs are having a slight impact on inflation, though not enough to keep the Fed from cutting interest rates.
-
How Big Will the Fed Rate Cut Be This Fall?A dismal July jobs report has lifted expectations for fall rate cuts. How low could the fed funds rate be by year's end?
-
July Jobs Report Renews Rate-Cut Hopes: What the Experts Are SayingThe July jobs report shows weakening in the labor market and lifts expectations for a September rate cut.
-
Should You Buy These ETFs Before the Fed Cuts Rates?The Fed is likely to lower interest rates this fall, and tactical investors might want to look closer at these ETFs before rate cuts resume.
-
July Fed Meeting: Updates and CommentaryThe July Fed meeting came and went, with Fed Chair Powell saying little about a September rate cut and President Trump.
