Mutual funds having significant exposure to diversified bonds are excellent choices for investors seeking steady returns with a relatively low level of risk. Investing in funds that maintain a portfolio of bonds issued across a wide range of market sectors also reduces sector-specific risk.
Moreover, investing in diversified bond funds is more preferred to individual bond investing, as building a portfolio of the second type may prove relatively more expensive. A higher level of liquidity also makes diversified bond funds more attractive.
Below, we share with you three top-ranked diversified bond mutual funds, namely BlackRock Floating Rate Income Portfolio Investor A Shares BFRAX, BBH Limited Duration Fund BBBMX and Pacific Funds Strategic Income PLSFX. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of funds.
BlackRock Floating Rate Income Portfolio Investor A Shares seeks high current income along with long-term capital appreciation by investing most of its assets in floating rate investments and other instruments with similar economic characteristics, which effectively enables the fund to achieve a floating rate of income. BFRAX advisors also invest in senior floating rate loans or second lien floating rate loans without limitation.
BlackRock Floating Rate Income Portfolio Investor A Shares has three-year annualized returns of 1.7%. As of the end of August 2022, BFRAX, has 63.69% of its assets invested in miscellaneous bonds.
BBH Limited Duration Fund invests most of its net assets in a diversified portfolio of durable, performing fixed-income instruments. BBBMX advisors generally choose to invest in asset-backed securities, notes and bonds issued by domestic and foreign corporations and financial institutions and U.S. government issues by various agencies.
BBH Limited Duration Fund has three-year annualized returns of 1.0%. BBBMX has an expense ratio of 0.27% compared with the category average of 0.44%.
Pacific Funds Strategic Income invests most of its net assets in a portfolio of debt securities based on the advisors’ view of the market. PLSFX advisors invest in non-investment grade debt instruments like floating rate loans as well as investment grade debt instruments like corporate debt securities, asset-backed securities, mortgage-related securities issued by U.S. government securities and agency securities in various proportions.
Pacific Funds Strategic Income has three-year annualized returns of 0.9%. Brian M. Robertson has been one of the fund managers of PLSFX since December 2011.
To view the Zacks Rank and the past performance of all diversified bond mutual funds, investors can click here to see the complete list of diversified bond mutual funds.
Want key mutual fund info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report