Sarah Bush: Silver-rated PIMCO Diversified Income (PDIIX) takes a wide-ranging approach. Manager Curtis Mewbourne and his team start with a blended benchmark that includes an emerging-markets index, a global aggregate investment-grade index, and a high-yield global index.
As a result, this fund tends to take on more credit risk and emerging-markets risk and lands in Morningstar's multisector-bond category.
Like other PIMCO managers, Mewbourne starts with macro views developed by PIMCO's investment committee and then puts those to work in making sector and asset-allocation decisions. These decisions are key to the fund's strategy, and Mewbourne expects that more than half of the fund's excess returns will come from sector and asset allocation through a cycle.
Once those sector decisions are determined, Mewbourne turns over to the specialist team to select individual bonds. A well-designed process, PIMCO's topnotch macro-research resources, and a strong long-term record give this bond a Morningstar Analyst Rating of Silver.