Sumit Desai: We recently raised the Morningstar Analyst Rating for BlackRock Total Return (MAHQX) to Silver from Bronze.
As an intermediate-term fund benchmarked against the Barclays U.S. Aggregate Bond Index, investors can use this fund as part of a core fixed-income position within a diversified portfolio.
The fund is run by BlackRock's global CIO of fixed income, Rick Rieder, and comanager Bob Miller. The duo takes a measured approach to fixed-income markets, spreading their bets across various sectors. This strategy is consistent with Rieder's mantra of making a little bit of money in a lot of different ways.
Duration for the total portfolio can range within 40% of the Barclays U.S. Aggregate Bond Index, and up to 20% of total assets can be invested in below-investment-grade securities. The portfolio does make heavy use of derivatives to express macro views and manage volatility. This adds a layer of complexity to the fund, but the team has managed these instruments well.
The fund's upgrade to Silver was based on a variety of factors. First, Rieder and Miller have provided stability to the fund's management and to BlackRock's overall fixed-income platform. The team has been in place for several years now after significant changes following the 2008 financial crisis.
This fund also benefits from the rigor of BlackRock's risk-management and analytics systems. The team relies heavily on risk-management tools to understand portfolio-level exposures, correlations across holdings, and to help avoid unintended risks in the portfolio.
The team has used these resources to generate admirable performance. The fund's trailing three- and five-year returns are both in the top 5% of the intermediate-term bond category, and these returns were generated with less volatility on average than its peer group. Over time, this team has shown a knack keeping their finger on the pulse of fixed-income markets.
The fund's reduced fee structure also contributed to the upgrade of its Analyst Rating. The price tags on several share classes were reduced over the past year, making this a reasonably priced option for fixed-income investors.