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3 Multisector Bond Medalists With Unique Approaches

These funds take different paths, but still land within the wide constraints of the category.

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Kenneth Oshodi: Multisector bond fund managers have the option to invest across a wide swath of assets. Some of the traditional category trappings include healthy exposures to investment-grade and high-yield corporate debt, government debt, and emerging-markets bonds. But there are quite a few different approaches.

Investors should expect to see a fund's government debt weighting near 10% of assets, but some managers place more of an emphasis on this asset class. For example, the team behind [Silver-rated] Fidelity Strategic Income has been willing to invest more freely here and allocated nearly 40% of portfolio assets to Treasuries in 2015.

Most multisector bond funds also hold a few percentage points of mortgage debt, but some teams emphasize this exposure more than others. Silver-rated PIMCO Income is run by two mortgage specialists. Accordingly, the fund has trafficked more in this asset class than most peers. The fund’s nonagency mortgage stake has regularly neared 30% since 2013.

Bronze-rated T. Rowe Spectrum Income is a fund that tends look more like the category norm, but it also stands out due to its sizable allocation to equities, which has represented over 10% of fund assets since late 2013. Most peer multisector bond funds only hold a few percentage points of equity exposure.

Each of these three funds holds many of the traditional multisector bond asset classes, but each management team takes a different approach that still lands within the wide constraints of the category.

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