5 / 5 Stars
5 5 4 1 1
Zacks Investment Research
Standard & Poor's
4 / 5 Stars
#18 in Short-Term Bond
U.S. News evaluated 128 Short-Term Bond Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.
The fund has returned 5.29 percent over the past year, 4.42 percent over the past three years, 7.86 percent over the past five years, and 5.33 percent over the past decade.
|Trailing Returns||Updated 06.30.2014|
|Year to date||2.8%|
|3 Years (Annualized)||4.4%|
|5 Years (Annualized)||7.9%|
|10 Years (Annualized)||5.3%|
Short-term bond funds are generally reputed to be relatively safe investments and an alternative to low-yielding money market funds. The Virtus Multi-Sector Short-Term Bond Fund takes a few more risks and invests in some evolving and out-of-favor bond market sectors, as well as some lower-quality bonds.
As of July 03, 2014, the fund has assets totaling almost $8.94 billion invested in 938 different holdings. Its portfolio consists of a diverse mix of domestic and international short-term bonds, mostly in mortgage-backed securities and corporate bonds. Manager David Albrycht says size matters in the short-term bond arena because being smaller allows a certain agility that mega-funds can't compete with. "At $3.4 billion, we're still very nimble and we can be very tactical," he says. "Ten million matters to me, where it wouldn't matter for a $100 billion fund."
Like countless other funds, the Virtus Multi-Sector Short-Term Bond Fund stumbled in the wake of 2008's financial and credit crisis. However, the fund rebounded in 2009, posting double-digit cumulative gains. The fund performed fairly well in 2010, but Morningstar cautions that investors shouldn't expect these gains to continue for the short-term bond category over the long term.
Albrycht says lately, he likes bank loans because although there's a bit more risk involved with investing in higher-yielding products, they're floating-rate assets, which means that they also have some built-in inflation protection. "It's one of those very unique things," Albrycht says. "It actually has three times the correlation to inflation as a TIP [Treasury Inflation-Protected Security] does." The fund has returned 5.29 percent over the past year and 4.42 percent over the past three years.
The fund has only lost money once, in 2008, over the 10-year period starting in 2000. Overall, the fund has slightly lagged its benchmark, but has outperformed its category peers consistently. The fund has returned 7.86 percent over the past five years and 5.33 percent over the past decade.
Albrycht uses a value-oriented approach to invest in a wide array of short-term bond products, including specialized and out-of-favor sectors such as bank loans and lower-quality corporate bonds. "Without exception, we have the most flexibility in the entire category. We use more sectors than anybody," Albrycht says. "There's always opportunity somewhere within the bond market." The fund's primary objective is price stability and total return and Albrycht seeks to produce "not only income, but capital appreciation," he says.
Total assets are fairly evenly split between bonds with higher A to AAA ratings, and lower-quality bonds. "I'm not an index-like fund. In other words, I'm not a corporate-bond fund," Albrycht says. "A corporate bond fund would overweight names they like. For me, if I like the sector I have an allocation to it. My thing is if I like it, I'm allocating; if I don't like it I have zero."
Above all, Albrycht says he wants to be tactical and liquid. "I don't want to be stuck in a sector if I have names that I can't get out of," he says. "I want to be tactical and be able to move around among sectors."
David Albrycht, the fund's manager since 1993, leads a team of 26 investment professionals who provide research across all bond market sectors.
Virtus Multi Sector Short Term Bond Fund has an expense ratio of 0.99 percent.
Investing in high-yield bonds may subject the portfolio to greater credit and market risks.