Valuation-Driven Process Boosts Scout Core Plus Bond

Cara Esser: Scout Core Plus Bond is backed by a long-tenured team that has been running this portfolio since its 1996 inception. The team views risk as permanent capital loss, rather than tracking error or volatility. In that vein, they maintain strict valuation criteria to ensure they are compensated for the risk that they take on.

This can lead to large swings in the fund's portfolio positioning, and the team isn't afraid to take strong positions. For example, the team stashed more than half of its portfolio in Treasury bonds and cash as of December 2016 as they have become much more concerned about market uncertainty and the ensuing volatility in the market going forward.

The managers' view of valuation and the resulting positioning are the main driver of returns, and the team has made some prescient calls over many market cycles, including reducing credit going into the high-yield sell-off beginning in mid-2014. Over the trailing 15 years through January 2017, the fund ranks among its category's best and beat the benchmark by 153 basis points, annually.

Add in relatively low fees and the fund earns a Morningstar Analyst Rating of Silver.