Must-read: How to invest in unconstrained bond funds

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Fixed income investors have options 

Unconstrained bond funds such as the Goldman Sachs Strategic Income Fund A (GSZAX) have attracted significant investor interest in recent months. The assets under management in the nontraditional bond category, tracked by Morningstar, grew to ~$153 billion as of the end of September 2014, from ~$51 billion on December 31, 2011, as shown in the graph in Part 1.

In comparison, total net assets for intermediate-term bonds stood at ~$1 trillion as of the end of September 2014. Intermediate-term bonds are a category that include the Vanguard Total Bond Market ETF (BND) and the iShares Core Total U.S. Bond Market ETF (AGG). Total net assets in high-yield bond (HYG) (JNK) (PHB) funds stood at ~$307 billion, according to Morningstar.

Part 6

There are a number of options available to those interested in investing in these funds. We’ll look at the key fund characteristics of the more prominent players. But investors are advised to read the respective fund prospectuses for more details.

The JPMorgan Strategic Income Opportunities A (JSOAX)

With net assets of $26.9 billion, JSOAX is the largest U.S. unconstrained bond fund. It’s also one of the oldest, having launched in October 2008. The fund returned 1.3% in 2014—through September 30, 2014.

The Goldman Sachs Strategic Income Fund A (GSZAX)

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With ~$25.9 billion in total net assets under management, GSZAX is one of the more well-established funds in the category. The fund was founded in June 2010. So it’s also had a relatively longer track record. The fund experienced ~$17.9 billion in inflows in the 12 months to April 2014. The fund returned ~3.4% in 2014—through September 2014.

The BlackRock Strategic Income Opportunities Investor A (BASIX)

BlackRock’s Strategic Income Opportunities Fund also numbers among the older and larger funds in the category. The fund launched in February 2008. Net assets were estimated at $19.7 billion as of September 30, 2014. The fund experienced ~$11.3 billion in inflows in the 12 months to August 2014. The fund has returned ~3% in 2014—through September 30, 2014.

In the next part of this series, we’ll discuss more options for you and how Bill Gross’ departure from PIMCO may affect unconstrained bond funds.

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