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Sidestepping the Pitfalls in Bonds

Cara Esser, CFA

Cara Esser: The long-tenured managers of Lord Abbett Total Return (LTRAX) add value by rotating among bond sectors based on broad-market trends, moving into sectors with the best perceived risk/reward trade-offs and out of those that managers believe are overvalued or do not offer enough upside potential for the risk. 

Top-down strategies like this can be difficult to execute consistently, but the team has managed to avoid major pitfalls over the years. The fund's 5% annualized gain during the trailing 10 years through Aug. 31 was better than 80% of peers.

The managers have been with this fund since its August 2000 inception and are backed by a 20-person credit research team, nearly a dozen specialists, and a half-dozen traders. 

Finally, the fund's 82-basis-point expense ratio is lower than its average [intermediate-term bond] peer. Overall, the low expenses and the strong long-term track record earn the fund a Morningstar Analyst Rating of Bronze, making it a good choice for core bond holding.