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4 of the Best Bond Investors

These active managers have been consistently successful in the fixed-income market.

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Actively managed fixed-income funds can generate outperformance from a variety of sources. Examples include sector rotation, which is the skillful shifting of assets across sectors such as mortgages, corporate bonds, and U.S. Treasuries, and a persistent overweight in credit-sensitive assets, which works during periods of stability but can come back to bite funds during corrections. A third example is issue selection, how portfolio managers choose one bond over another. Given the sheer size of the fixed-income universe and the time-intensive nature of issue selection, being consistently good at it can be a rare thing. Here are some of the best bond-pickers among Morningstar Medalist funds.

Artisan High Income ARTFX is among the best offerings in the high-yield bond Morningstar Category, earning a Morningstar Analyst Rating of Silver for all share classes. Manager Bryan Krug oversees a concentrated portfolio that is the result of an intensive research process. While his team is not the largest in the high-yield bond market, it doesn’t need to be; analysts’ coverage lists are kept small, giving them ample time to produce deep, differentiated research. On its face, the portfolio is among the riskiest in the category with a heap of CCC rated bonds, but over time the selection skills of Krug and his team have navigated that potential risk with finesse.

Fidelity Intermediate Municipal Income FLTMX is a standout among muni-national intermediate funds and earns a Silver rating on its cheapest share classes. While the group managing this strategy has gone through some transitions over the past few years, it remains supported by an experienced bench of analysts and associates that wield substantial proprietary research tools and capabilities. The team is traditionally cautious, preferring to let its selection abilities within higher-rated parts of the municipal-bond market distinguish returns, rather than adding extra volatility through credit risk or leverage. Indeed, the team analyzes bonds from a variety of angles: credit quality, dislocations along the maturity spectrum, and unique structural traits or financial flexibility that the market doesn’t fully appreciate.

Metropolitan West Total Return Bond MWTRX has long been in the ranks of elite bond funds and carries Analyst Ratings of Gold across all share classes. While its managers largely focus on relative value between bond sectors and ensuring the portfolio is properly positioned based on their view of the credit cycle, that approach would fall flat without robust security selection from the supporting teams. The firm’s securitized and corporate credit teams are among the strongest in the industry, with security selection from both regularly contributing positively to the fund’s returns, even in highly efficient sectors such as agency mortgages. The combination of this supporting strength with the managers’ allocation skills explains much of the fund’s long-term success.

Pimco Global Bond Opportunities (U.S. Dollar-Hedged) PAIIX stands out in the global bond—USD hedged category and has Gold ratings on its cheapest share classes. Like many Pimco funds, there is a lot going on under the hood with this strategy. Its flexibility sets it apart from many competitors and includes a 20% limit on high-yield bonds, a wide duration band of 2.0-8.0 years, and the Pimco penchant for opportunities in unique securitized markets such as U.K. residential mortgages. That flexibility might be overwhelming for some, but Pimco has the resources to conduct deep diligence on each opportunity, while lead manager Andrew Balls and his team have done a good job picking from that opportunity set over time.

Brian Moriarty does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.