American Funds Bond Fund of America Fund

Scorecard
2 / 5 Stars
Lipper
3 2 4 4 4
Zacks Investment Research
3 (Hold)
Standard & Poor's
3 / 5 Stars
TheStreet.com
C- (Hold)

#142 in Intermediate-Term Bond

U.S. News evaluated 280 Intermediate-Term Bond Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.

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Performance

The fund has returned 0.27 percent over the past year, 3.93 percent over the past three years, 7.13 percent over the past five years, and 3.55 percent over the past decade.

Trailing Returns Updated 02.28.2014
Year to date 2.2%
1 Year 0.3%
3 Years (Annualized) 3.9%
5 Years (Annualized) 7.1%
10 Years (Annualized) 3.5%

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Summary

The Bond Fund of America fund has a mixed history of success because of the credit risks management is willing to take. The fund took a beating during the downturn, but as of the end of May it has annualized returns of more than 8 percent since its 1974 inception.

As of March 05, 2014, the fund has assets totaling $27.08 billion. Its portfolio consists primarily of investments in high-rated bonds with some holdings in lower-rated bonds and foreign debt.

After taking advantage of the huge rally in corporate bonds in 2009, management has adopted a more conservative strategy by upping its holdings in U.S Treasuries. Management has pared down its corporate holdings, but they still made up about 30 percent of the fund's total assets, as of early 2011. (10 percent of that figure represents foreign corporates.) American says its portfolio counselors "remain concerned about the extent of the problem loans and mortgages and have sought to buffer the portfolio against additional volatility." The fund has returned 0.27 percent over the past year and 3.93 percent over the past three years.

Management is willing to take credit risks, which means the fund can shine during big rallies but may underperform in tough times and the perennial flight to safety that often accompanies market volatility. Because of such concerns, the fund's prospectus allows more room for management to invest in U.S. government bonds, according to Raymond James. Holdings of more than 1,900 individual securities make for a fairly diversified fund. "It can invest in just about the full gambit of opportunities in the fixed-income marketplace, albeit without doing anything fancy in terms of derivates or leverage," says Dale Hanks, vice president with Capital Research and Management. The fund has returned 7.13 percent over the past five years and 3.55 percent over the past decade.

Investment Strategy

Raymond James says, "The fund offers a unique blend of high-quality, investment-grade corporate bonds and lower-quality, higher-yielding bonds that result, on average, in an investment-grade portfolio."

Role in Portfolio

Morningstar assigns the fund a "core" role in portfolio.

Management

Like other American family funds, this fund is run by a team of "counselors" instead of a single manager. The fund's adviser, Capital Research and Management, which has managed the fund for more than 30 years, has assigned to it a team of six.

Fees

American Funds Bond Fund of America Fund has an expense ratio of 0.61 percent.

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Risk

Management still maintains higher-than-average holdings in mid- and low-quality, high-yield bonds, according to Morningstar.

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Fund Opinions

The fund's Value Line Overall Rank, a measure of risk-adjusted performance and relative growth in fund returns, is 3 on a scale of 1 to 5, with 1 being the best and 5 the worst.

Value Line 2014-03-12

The fund's Value Line Growth Persistence rank, which awards funds that consistently outperform their broad universes, is 3 for one year, 3 for five years, and 4 for 10 years. Scores are on a 1 to 5 scale, with 1 being the best and 5 the worst.

Value Line 2014-03-12

The fund's Value Line Risk Rank, a measure of volatility, is 2 on a scale of 1 to 5, with 1 being the least volatile and 5 the most.

Value Line 2014-03-12

Morningstar gives this fund a stewardship rating of B on a scale of A to F, saying, “This fund is supported by a fund-holder-focused corporate culture and a fund board led by an independent chairman. Its fees also are reasonable. We'd like to see more manager ownership of fund shares, but, overall, this fund is a strong steward of capital.”

Morningstar 2011-03-31

In the January 2010 edition of Morningstar's Fund Family Reports, John Coumarianos says, "We have some reservations about Bond Fund of America’s transformation, but we mostly think it’s a positive development. Basically, the fund will now have a permanent stake in U.S. Treasuries, though that stake will fluctuate."

Morningstar 2010-06-02

In the annual Lipper/Barron's Fund Families Survey of 2010, American Funds ranks 49th out of 57 fund families surveyed.

Lipper

In the January 2010 edition of Morningstar's Fund Family Reports, John Coumarianos says, "We have some reservations about Bond Fund of America’s transformation, but we mostly think it’s a positive development. Basically, the fund will now have a permanent stake in U.S. Treasuries, though that stake will fluctuate."

Morningstar 2010-06-02

In the annual Lipper/Barron's Fund Families Survey of 2010, American Funds ranks 49th out of 57 fund families surveyed.

Lipper