Harbor Bond Fund

^#50 in Intermediate-Term Bond

U.S. News evaluated 320 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 6.97 percent over the past year, 6.29 percent over the past three years, 7.12 percent over the past five years, and 6.16 percent over the past decade. 

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Summary

Under the steady management of legendary fixed-income investor Bill Gross, Harbor Bond has made a habit of leaving the competition in the dust. 

As of May 03, 2013, the fund has assets totaling almost $7.94 billion invested in 1,833 different holdings. Its portfolio consists of a mix of treasuries, mortgage-backed securities, and corporate bonds.

Harbor Bond is subadvised by PIMCO and managed by Bill Gross. One of the bond fund industry's most recognizable names, Gross is also the manager of PIMCO Total Return, which has the distinction of being the world's largest mutual fund. Harbor Bond has frequently been called a cheaper (in terms of its expense ratio) version of PIMCO Total Return, and its performance over time has lent support to that parallel. Recently, the fund has been playing it safe. "The bottom line is you can't get much above a 1 percent yield on your cash without taking a significant amount of risk in the markets today. Defensiveness may have a small opportunity cost in terms of yield, but as we've learned over time it's very dangerous to reach for yield when the markets are fragile," according to management commentary released by the fund at the start of the third quarter of 2010. These fragile markets, combined with an anemic economy, have caused Gross to caution investors against getting too used to high-flying returns from bond funds. Meanwhile, in a bid to stay flexible, management has indicated an intent to maintain a large cash stake. The fund has returned 6.97 percent over the past year and 6.29 percent over the past three years. 

In 2009 and 2010, the fund's returns haven't differed much from the average numbers for Morningstar's intermediate-term bond category. But its long-term success is hard to argue with. As of the end of the second quarter of 2010, the fund's trailing five-, 10-, and 15-year returns all landed it in the top 5 percent of that very same category. Says Morningstar: "If bond market history has taught anything, though, it's not to count out Bill Gross. Even when he's been wrong or early with calls in the past, he has almost always managed to respond and adjust quickly enough to get this, and other funds under his charge, back on track." The fund has returned 7.12 percent over the past five years and 6.16 percent over the past decade.

Investment Strategy

According to the fund's prospectus: "The Fund invests primarily in bonds of corporate and governmental issuers located in the U.S. and foreign countries, including emerging markets. ... [PIMCO] relies on its own proprietary research and analysis to manage the Fund's portfolio. [PIMCO] uses a top-down strategy to focus on broad factors and monetary conditions." Lately, Gross has been concerned about the health of the economy, and these worries have caused him to take a conservative approach.

Role in Portfolio

Morningstar calls this fund a "core" holding.

Management

Bill Gross has managed the fund since its 1987 inception. 

Fees

Harbor Bond Fund has an expense ratio of 0.54 percent. 

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Risk

One of the biggest risks for bond funds is the potential for rising interest rates. As interest rates go up, bond prices decline.

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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 2 on a scale of 1 to 5, with 1 being the best and 5 the worst.

Value Line 2013-03-12

The fund's Value Line Growth Persistence rank, which awards funds that consistently outperform their broad universes, is 2 for one year, 3 for five years, and 2 for 10 years. Scores are on a 1 to 5 scale, with 1 being the best and 5 the worst.

Value Line 2013-03-12

The fund's Value Line Risk Rank, a measure of volatility, is 3 on a scale of 1 to 5, with 1 being the least volatile and 5 the most.

Value Line 2013-03-12

The fund appears on the 2011 "Kiplinger 25" list of the best no-load mutual funds.

Kiplinger 25 2011-04-13

The fund appears on the 2011 Money 70 list of recommended mutual and exchange-traded funds.

Money 70 2011-01-21

"We continue to view PIMCO as the premier fixed-income fund manager for investors who want a taxable, intermediate-term, high-quality bond fund. Our strong conviction stems from the firm’s disciplined investment process."

Litman Gregory 2010-06-30

The fund is subadvised by PIMCO and run by the same manager who oversees PIMCO Total Return, the world's largest mutual fund. 

2010-09-12

The fund is subadvised by PIMCO and run by the same manager who oversees PIMCO Total Return, the world's largest mutual fund. 

2010-09-12