A Gold-Fund in a Melting Pot Category

Alaina Bompiedi: Morningstar's intermediate-term bond category is a melting pot. Most intermediate-term bond funds follow the broad bond market indexes, but many display some unique attributes. The 300 funds in this category have durations ranging from 3.5 to 6.0 years, can exhibit biases for mortgages or corporate bonds, and--in a handful of cases--can carry as much as 30% high yield.

Among such a diverse peer group, newly Gold-rated Baird Core Plus Bond stands out for its consistent style, excellent approach to risk management, and strong stewardship. The fund follows the Bloomberg Barclays Universal Index, which is a good match for the types of bonds it tends to like. The fund invests across a well-trodden landscape of government, mortgage-backed, and corporate debt and can own up to 20% high yield for additional octane.

Industry veteran Mary Ellen Stanek and the five other comanagers on this team have helmed this fund for almost two decades. They drive performance by modestly over- or underweighting corporate and mortgage-backed names that are also in the benchmark, complemented by sector rotation and some yield-curve positioning. Their straightforward process has a few design features, which function as risk controls. They keep the strategy duration-neutral to limit interest-rate volatility and avoid classes of bonds that could present exogenous risks or don’t meet their standards for transparency. That includes subordinated mortgage and asset-backed fare and emerging-markets sovereigns. This team’s stringent investment standards and attention to detail, complemented by low fees, have helped the fund outperform 90% of its category peers since its inception in October 2000.