Best Bond Funds #1: Pimco Income Fund (PONDX)
Click to Enlarge Despite the looming threat of higher interest rates, I am still continuing to look for opportunities in fixed income that are designed to maximize income while focusing on risk management. An actively managed mutual fund that is one of my favorite core holdings is the Pimco Income Fund (PONDX), managed by Dan Ivascyn.
Coincidentally, Ivascyn was just recently named the 2013 fixed income manager of the year by Morningstar and was promoted to deputy CIO at Pimco. He has a long track record of spotting early trends and capitalizing on security selection through this research.
PONDX takes a multisector approach to specific areas of the bond market that the manager feels will outperform over time. They have done a fantastic job of managing interest rate risk in 2013 and taking advantage of opportunities (both inside and outside the U.S.) when they are available. This has led to 2013 returns of better than 4.5%, an effective duration of less than five years, and a current 30-day SEC yield of nearly 4%.
One of the interesting features of PONDX is that the fund accrues interest daily and distributes it monthly. So it does not subtract dividends from the NAV of the fund when distributions are paid. This allows you to reinvest additional shares as income that builds your position over time.