Cara Esser: T. Rowe Price New Income (PRCIX) has been a reliable core bond portfolio that packs a little more punch than the Barclays [U.S Aggregate Bond Index]. The fund's investable universe is wider than the Barclays Agg, though it does invest heavily in U.S. Treasuries, investment-grade corporate bonds, and agency mortgages. Some of the out-of-benchmark sectors include emerging-markets corporate bonds, high-yield bonds, and asset-backed securities.
Longtime manager, Dan Shackelford allocates to these core and diversifying sectors, based on the macro views of a slate of experienced T. Rowe Price portfolio managers. Relative value of each sector also plays a role. For example, following the 2008 financial crisis, he allocated to more credit-sensitive bonds. As those bonds have rallied and become more expensive, he has allocated to more attractively valued sectors like emerging-markets corporate bonds.
Over the long term, the fund has outpaced the Barclays Aggregate Bond Index and avoided some of the fixed-income market's worst gyrations. Over the trailing 10 years, the fund has outpaced the index by 30 basis points on an annual basis. It has also outperformed two thirds of its intermediate-term bond peers. Add to that a below-average expense ratio and this fund is a keeper.