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MFS Corporate Bond Uses Credit Risk Wisely

Brian Moriarty

Brian Moriarty: MFS Corporate Bond fund is a strong choice for investors looking to add credit risk to their portfolio. The fund invests primarily in investment-grade corporate bonds, but it does include a high-yield allocation that usually ranges from 10 to 20%.

Managers and analysts focus much of their time on bonds rated BBB and BB. They argue that this portion of the corporate bond universe is less efficient than the rest of the  market, and it offers them an opportunity to demonstrate their skill at security selection.

That strategy has clearly benefited investors over the long term. While the fund might not rank at the top of the category every year, it has been consistently good over a long period of time. As of August 2017, the fund's trailing 10-year annualized return of 6%  ranks in the top 25% of its category. It has also managed that record with lower volatility than peers, despite its allocation to high-yield bonds.

Based on its strong long-term returns and skill at security selection, this Bronze-rated fund is worth investors' attention.