Metropolitan West Total Return Bond Fund

Scorecard
5 / 5 Stars
Lipper
5 5 5 5 1
Zacks Investment Research
3 (Hold)
Standard & Poor's
4 / 5 Stars
TheStreet.com
A (Buy)

#15 in Intermediate-Term Bond

U.S. News evaluated 278 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 1.07 percent over the past year, 5.63 percent over the past three years, 9.22 percent over the past five years, and 6.30 percent over the past decade.

Trailing Returns Updated 03.31.2014
Year to date 1.8%
1 Year 1.1%
3 Years (Annualized) 5.6%
5 Years (Annualized) 9.2%
10 Years (Annualized) 6.3%

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Summary

Despite the appearance of change, this sizeable bond fund is as steady as ever.

As of April 22, 2014, the fund has assets totaling almost $27.13 billion invested in 1,319 different holdings. Its portfolio consists of fixed-income investments, including treasuries, mortgage-backed securities, and corporate bonds.

In December 2009, bond giant TCW acquired Metropolitan West to help run its bond offerings. In the process, Met West's Tad Rivelle, who has been with MetWest Total Return Bond since its 1997 inception, was put on the management team of seven TCW funds. So far, there's no evidence that Rivelle, who continues to co-manage MetWest Total Return Bond, is stretched thin, and he and the rest of the fund's core team (which, despite the transition, has remained unchanged) have put together a great record so far.

Recently, the fund has found value in non-agency mortgage-backed securities. These types of securities, which hit rock bottom during the downturn, have since rebounded strongly. "This has basically been a movement in the direction of more sane and equilibrium pricing in this segment of the marketplace," says Rivelle. The fund has also bought a significant chunk of Build America Bonds. These taxable municipal bonds, which were created as part of the federal stimulus bill, help state and local governments fund projects and offer investors attractive yields. One recent detractor from performance has been the fund's underweight in treasuries. Still, despite--or perhaps because of--treasuries' heated rally this year, Rivelle says he doesn't find them to be particularly attractive going forward. "The treasuries market has gone along way in terms of running out of room," he says. The fund has returned 1.07 percent over the past year and 5.63 percent over the past three years. 

Historically, the fund has done a solid job of navigating the bond market. One notable exception was 2002, when the fund fell flat and underperformed its benchmark, the Barclays Capital U.S. Aggregate Bond Index, by more than 11 percentage points. The fund has returned 9.22 percent over the past five years and 6.30 percent over the past decade.

Investment Strategy

The fund looks to beat the returns of the Barclays Capital U.S. Aggregate Bond Index. In doing so, mortgage-backed securities and corporate bonds are two of its mainstays. The fund owns a fair amount of treasuries, but compared with its benchmark, it's still underweight in the sector. Instead of treasuries, management will often buy bonds tied to government agencies like Fannie Mae and Freddie Mac. Because Fannie and Freddie were effectively nationalized during the downturn, management sees them as being substantially similar to--but ultimately more attractive than--treasuries. Within corporates, management likes the financial, utility, and energy sectors.

Role in Portfolio

Morningstar calls this fund a "core" holding.

Management

Managers Tad Rivelle, Laird Landmann, and Stephen Kane have all been with the fund since its 1997 inception. Co-manager David Lippman has been with the fund since 2001. 

Fees

Metropolitan West Total Return Bond Fund has an expense ratio of 0.61 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 1 on a scale of 1 to 5, with 1 being the best and 5 the worst.

Value Line 2014-04-10

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

Value Line 2014-04-10

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 2014-04-10

MetWest was recently acquired by TCW. 

MetWest was recently acquired by TCW.