This go-anywhere fixed income fund's risks have been well rewarded

Manulife Strategic Income can serve as a complement to core bond funds in a diversified portfolio.

Jeffrey Bunce, CFA 13 March, 2018 | 5:00PM
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The objective of Manulife Strategic Income is to earn competitive returns while keeping volatility under control. The manager aims for a relatively high Sharpe ratio -- a measure of risk-adjusted performance – and have delivered on that promise over the fund's history, which dates back to November 2005, making this fund a strong fixed income candidate for inclusion in an investor's portfolio.

Investors should be mindful that the fund possesses more corporate credit exposure and a correlation with equities a notch above traditional core bond funds, though, meaning it may better serve as a complement to core bonds within a balanced portfolio.

The key to this fund's successful record has been a well-executed strategy of combining sector rotation with currency management and credit selection. Interest rate management also factors into the mix. The fund will take meaningful stakes in whatever segment of the fixed income market its management team deems most attractive, whether it is U.S. high-yield, foreign government bonds (including emerging markets), investment-grade credit, U.S. Treasuries or securitized paper. The fund can go down the capital structure and own convertible bonds, preferred shares and even common stocks in small amounts.

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About Author

Jeffrey Bunce, CFA

Jeffrey Bunce, CFA  Jeffrey Bunce, CFA, is a senior investment analyst for Morningstar’s Investment Management group.

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