Treasury Allocations, Diverse Holdings Set This Fund Apart

Kenneth Oshodi: There are many funds that come across our desks at Morningstar, and Lord Abbett Income is one that recently caught our attention.

This fund's management team is comprised of Rob Lee, Kewjin Youh, Andrew O'Brien, Steven Rocco, and Leah Traub; and both Lee and O'Brien have been portfolio managers on this fund since the late '90s.

The team's goal here is to use sector rotation and fundamental analysis across a wide range of fixed-income assets to deliver a high level of current income. This approach has led to a portfolio that tends to be more diversified than many of its Morningstar corporate bond peers and its Bloomberg Barclays US Credit Total Return Index benchmark. One of the ways that this fund sets itself apart is with healthy allocations to U.S. Treasuries, as well as securitized assets. The team will also allocate to high-yield bonds, which is an out of index position and currently on the heavier side of allocations for its category.

This approach has led to good performance, but the fund has had its fair share of volatility. With that said, its 10-year annualized return through 2016 outpaces both its index and most of its Morningstar peers. It has also been an attractive performer on a risk-adjusted basis, as measured by the Sharpe ratio.

While this fund has a mixed fee profile, expenses for 60% of assets are low when compared to peers in the Morningstar universe. And reasonable fees only add to its other positives, which include a long-tenured team, effective process, and positive performance. Investors seeking a corporate bond fund should keep this one on their radar.