Emory Zink: The parameters of the Intermediate-Term Bond Morningstar Category--which includes funds with durations between three and a half and six years along with a primary focus on U.S. corporates and investment-grade fare--leave plenty of implementation flexibility for its various constituents. For example, Voya Intermediate Bond and JPMorgan Core Bond each receive Morningstar Analyst Ratings of Silver, underpinned in either case by experienced portfolio managers, a robust bench of analyst resources, thoughtful processes rooted in bottom-up cash flow analysis, and attractive price tags.
But regardless of their shared intermediate-term bond categorization and generally positive pillar ratings, these funds are not perfect substitutes for one another. JPMorgan Core Bond is invested almost exclusively in investment-grade-rated securities while Voya Intermediate-Term Bond will hold 10% to 15% in below investment-grade fare. This is partly owing to sector preferences. Both funds are underweight U.S. Treasuries, but in the case of Voya Intermediate-Term Bond, its team will venture into the plus corners of the market if relative valuations are attractive--including emerging markets, high yield, and modest allocations to esoteric mortgage derivatives--while JPMorgan Core Bond sticks primarily with investment-grade corporates, mortgages, and structured credit.
Over the trailing 10 years ended April 2018, both funds outpace the category's Bloomberg Barclays Aggregate Index Benchmark, as well as the category's median peer, but relative to one another, Voya Intermediate-Term Bond delivers modestly more absolute return, while JPMorgan Core Bond provides greater risk-adjusted returns, as measured by the Sharpe Ratio. These are results that are unsurprising given either portfolio's preferences.