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A Credit-Focused, Silver-Rated Short-Term Bond Fund

Alaina Bompiedi

Alaina Bompiedi: Investors seeking an investment-grade short-term bond fund and who are comfortable with a bias to corporates can consider Silver-rated Baird Short Term Bond.

The team at Baird aims to generate return through credit selection and gradual sector rotation across corporate bonds, U.S. Treasuries, and securitized fare. Corporates have had a big presence in the fund over the last 10 years, typically ranging from 50%  to 80% of assets since the financial crisis. As of April 2018, that corporate stake totaled just under 55% as the team padded on a defensive position in Treasuries. The team likes issuers that present good value and whose interests are aligned with bondholders. Reflecting those preferences, the fund's credit quality tilts overwhelmingly investment grade. However, the team is willing to hold modest positions in shorter maturity fare from riskier companies that they wouldn't include in funds like Baird Aggregate Bond.

To complement their credit selection, the team maintains a neutral duration to the fund's benchmark, the Bloomberg Barclays US Government Credit 1-3 Year Index, and maintains low fees to subdue to the need for outsize bets. Over the trailing 10-year period, that recipe has helped the fund outpace the majority of its category on a risk-adjusted basis as measured by the Sharpe ratio.