3 New Nontraditional Bond Funds Hit The Market
By DailyAlts Staff As fixed-income investors face asymmetrical interest-rate risk and other headwinds in 2015, nontraditional bond funds are looking more and more attractive. Such funds are often referred to as “go anywhere” funds, since they’re allowed to “go anywhere” in pursuit of their investment objectives. Three such funds were launched in the final month of 2014, as outlined below: Counterpoint Tactical Income As a new entrant into the liquid alternatives field, Counterpoint Mutual Funds launched its first mutual fund last month, the Counterpoint Tactical Income Fund. The fund has a focus on investing in high yield securities (including bonds, bank loans, floating rate bonds and debt and municipal high yield debt), but doing so when the firm’s algorithms identify trends that point to a risk-on environment. In risk-off environments, as identified by the firm’s trend-following algorithm, the fund will be allocated to less risky assets such as U.S. Treasuries and cash. The fund also has the ability to invest in derivatives to hedge against credit and interest rate exposure. The fund will pursue its tactical-income strategy by investing in mutual funds, closed-end funds, and ETFs, but also has the ability to invest directly in individual securities directly. In addition, the fund is permitted to use up to 33 1/3% leverage to pursue its objective of income and capital preservation. The fund is managed by the firm’s two founders, Michael Krause and John Koudsi, and carries a relatively high management fee of 1.25%. The fund is available in three share classes: A (MUTF: CPATX ), C (MUTF: CPCTX ), and I (MUTF: CPITX ); with respective net-expense ratios of 2.60%, 3.35%, and 2.35%. This compares to an average expense ratio of 1.30% for Morningstar’s Nontraditional Bond category. The minimum investment for A- and C-class shares is $5,000; while the minimum required for I-class shares is $100,000. For more information, download a pdf copy of the fund’s prospectus . Transamerica Unconstrained The Transamerica Unconstrained Bond Fund (ticker: TUNAX ) was launched on December 5, and like other Transamerica funds, this fund’s investment management is outsourced to an external sub-advisor. In this case, the fund’s sub-advisor is PineBridge Investments , which also manages the Transamerica Inflation Opportunities Fund (ticker: TIOAX ). The fund’s objective is to maximize returns through a combination of interest income and capital appreciation. PineBridge pursues this objective by employing an “unconstrained” style, taking long and short positions in debt instruments across sectors, geographies, capitalizations, and credit grades. PineBridge’s investment decisions are based on macroeconomic analysis that determines asset allocations, as well as specific investments within those allocations. The fund’s duration is expected to generally stay in the range of -3 years to +10 years. The fund is available in A- (TUNAX), C- (MUTF: TUNBX ), and I-class (MUTF: TUNIX ) shares, with a management fee of 0.64% and a relatively low net-expense ratios of 1.14%, 1.89%, and 0.89%, respectively. The minimum investment for A- and C-class shares is $1,000; while the minimum for I-class shares is $1 million. For more information, read the fund’s prospectus . Sentinel Unconstrained Finally, the Sentinel Unconstrained Bond Fund launched on December 23. The fund has the latitude to invest in U.S. and non-U.S. fixed income securities of any credit quality, can use shorting and derivatives and will maintain its duration in the range of -5 years to +10 years. The fund can also hold up to 20% in equity securities. Jason Doiron, portfolio manager and Head of Investments with Sentinel, will be the fund’s portfolio manager. The fund’s shares are available in A- (MUTF: SUBAX ), C- (MUTF: SUBCX ), and I-class (MUTF: SUBIX ) shares; with a 0.75% management fee and respective net-expense ratios of 1.56%, 3.56%, and 1.14%. Like the Transamerica Unconstrained Bond Fund, the minimum investment for A- and C-class shares is $1,000; while the minimum for the institutional I-class shares is $1 million. For more information, read the fund’s prospectus .