BTW, there are many aspects of this fund that make it much lower risk than you believe. For one thing, the average duration of the bonds in the fund is 2.85. So there is very little time risk and interest rate sensitivity. For another thing, he holds 13% cash for added stability and opportunism. Third, this guys has spent his entire career buying mortgage bonds and he has bought up a bunch of bonds at distressed prices, accounting for the potential for elevated risk from an long term slow recovery on default rates. When the macro picture scared everyone off, he was cherry picking and getting bargain basement prices, which is why he has the high yield with little of the risk. Lastly, close to 50% of his bonds are agency bonds, which also have little risk.
So the bottom line is that you may be over-estimating the risk on this mutual fund. Based on my own analysis, the fund is a rock steady holding in a very uncertain world. It has a very nice yield and the manager, Gundlach, is a steady hand with an uncanny ability to navigate economic uncertainty. During the last implosion of the economy during 2008-9, his TCW fund lost around 1%, even as the stock market lost 40%.
I'll take those odds any day, especially when they come with an 8%+ yield. |
