Investors are frantically repositioning their portfolios in light of the recent market response to Ben Bernanke’s pointed comments regarding the future of quantitative easing. There has been no place to hide, as fixed-income and equity investors have equally shared in the pain of downward price movement.

Although it might be the last thing on many investors’ minds, the year is half-over. That means it’s time to take a look at the scoreboard, then game-plan for the second half.

Naturally, the hardest-hit sectors are those that have the highest sensitivity to changes in interest rates. Preferred stocks, REITS and many fixed-income sectors are ripe with opportunity from weak-handed investors getting shook loose. Price dislocations are beginning to present themselves, and if you have cash on the sidelines, there are some great funds you should consider picking up.

When performing due diligence on a mutual fund, I will always compare the fund’s portfolio strategy and performance to a commensurate ETF. It would make little sense to pay higher fees, forgo daily liquidity and transparency by owning a subpar fund. I prefer alpha-creating management teams that operate an active or alternative strategy; one that can’t be replicated within the confines of an exchange-traded product.

Three funds I find appealing during this correction for clients of our strategic income portfolio include:

Osterweis Strategic Income Fund

Click to Enlarge Managed by the boutique investment management firm Osterweis Capital Management, the The Osterweis Strategic Income Fund’s (OSTIX) strategy seeks to provide capital preservation in concert with long-term total return. The fund typically invests in short-duration high-yield bonds, as well as convertible bonds, to achieve its objectives.

However, the strategy carries the flexibility to allocate anywhere in the fixed-income universe.

It is a “risk aware” strategy, meaning it will adapt to changes in the fixed-income environment, or move to cash in an attempt to shield its investors from an unfavorable investment outcome. This is precisely what OSTIX has done for investors in the weeks following the recent Fed announcement.

Although not an apples-to-apples comparison, when viewed next to a similar passively managed ETF, the PIMCO 0-5 Yr High Yield Corporate Bond Index ETF (HYS), there is a striking performance variation. On a year-to-date basis, OSTIX has not presented anywhere near the same magnitude of price volatility as HYS. I believe this is an excellent indication that the Osterweis fund will continue to make other timely changes to its portfolio to take advantage of the recent correction in high-yield bonds in the second half of 2013.

OSTIX has no sales load and charges 0.91% in expenses, or $91 for every $10,000 invested.

Fidelity Real Estate and Income Fund

Click to Enlarge Real estate investment trusts had a great start to the year thanks to an existing tailwind in the housing market coupled with the added stability of low interest rates. In what closely began to resemble the run-up we witnessed in these stocks during 2006, the rally came to an abrupt end after the Fed’s May 21 tapering comments. Since then, the iShares Dow Jones U.S. Real Estate Fund (IYR) has fallen roughly 13.5%, and I believe there could be an excellent buying opportunity setting up in real estate stocks.

However, for conservative income investors, I favor a mix of asset classes concentrated in the real estate sector as opposed to a dedicated basket of stocks. The Fidelity Real Estate and Income Fund (FRIFX) is an actively managed strategy with a current asset allocation of roughly 45% equity, 45% fixed income and 10% cash. It is broken up among common and preferred stock, asset-backed securities and and commercial mortgage-backed securities.

Looking at a comparison, the Fidelity fund did not participate in the large rally to the extent that IYR did, yet it also didn’t participate to the same degree in the decline. This is a slow and steady strategy that yields approximately 4%. In my opinion, this fund is perfect for income investors that can’t stomach the month-over-month price swings in REIT stocks alone, but still want exposure to the sector within their portfolio.

FRIFX also is a no-load fund that charges 0.89% in expenses.

DoubleLine Emerging Market Fixed Income Fund

Click to Enlarge With so much fear of the unknown in the markets, many investors feel more comfortable pulling their dollars back home to invest in familiar U.S. stock and bond names. Emerging-market fixed-income funds sold off precipitously as a result of a suspected slowdown in many EM countries, in addition to fears of high levels of inflation.

I prefer the DoubleLine Emerging Market Fixed Income Fund (DBLEX) strategy because it is highly concentrated in U.S. dollar-denominated, investment-grade, emerging-market corporate debt — and I believe that presents excellent risk/reward for income and capital appreciation over the next six months. The manager, Luz Padilla, favors quality exposure to quasi-sovereign companies that are classified as such because their business operation is vital to the host country’s economy.

In a comparison with the iShares Emerging Market Corporate Bond ETF (CEMB), you can see the approach has protected investors’ capital on the downside. I believe timely changes to the fund’s portfolio — to elongate the duration to capitalize on higher yields and lower price levels — could result in a great capital appreciation opportunity as markets stabilize.

Michael Fabian is Managing Partner and Chief Investment Officer of Fabian Capital Management. As of this writing, he was long OSTIX. To get more investor insights from Fabian Capital, visit their blog.