The Winning Strategies of Top-Performing Blue-Chip Bond Funds in 2024
Key Takeaways:
* Short-duration bonds and riskier blue-chip debt continue to be winning plays.
* High-quality fixed income assets like government bonds and agency MBS offer attractive opportunities due to wider spreads.
* Sectors benefiting from artificial intelligence, such as energy and technology, are expected to see increased demand.
* Managers emphasize identifying undervalued bonds and avoiding yield chasing in lower-rated segments.
Top-Performing High-Grade Bond Funds
In 2024, high-grade bond funds with shorter duration outperformed. The Principal Spectrum Preferred and Capital Securities Income Fund emerged as the top performer with a 9.81% total return. Principal Asset Management focuses on higher-rated companies and junior subordinated debt.
Pimco's Diversification Strategy
Pimco is finding opportunities outside of corporate bonds, in high-quality fixed income assets such as government bonds and agency MBS. According to portfolio manager Alfred Murata, wider spreads have created attractive opportunities.
Attractive Sectors for Junk Bonds
In the junk-bond market, Pimco favors sectors less sensitive to economic downturns, including healthcare and telecom. They also see potential in borrowers involved with artificial intelligence, but caution against potential AI-related disruptions.
Advice from Top Managers
* Andrew Hofer (Brown Brothers Harriman): Focus on identifying underpriced bonds with potential for spread narrowing.
* Marc Bushallow (Manning & Napier Advisors): Seek attractive individual opportunities in undervalued relative to risk.
* Mark Notkin (Fidelity Capital & Income Fund): Leverage flexibility to invest throughout the capital structure and prioritize stock allocation when attractive.
* Noah Funderburk (Pioneer Multi-Asset Ultrashort Income Fund): Favor shorter-duration bonds due to higher returns at current interest rates.