HY bonds appear to be trading in dangerous territory lately

[chang]

From M★: Some High-Yield Managers Are Making Bolder Bets: The lowest-rated bonds appear to be trading in more dangerous territory lately.

Link

My fund VWEAX is mentioned, in a sort-of positive way. ("Gold-rated Vanguard High-Yield Corporate (VWEAX) modestly increased its stake in debt rated CCC and below to 6% of assets as of March 2021, less than 100 basis points above the December 2019 level. This stake rests slightly above the strategy's historical average of roughly 5%--which does sit on the lower end of the category in general--though its manager has proved adept at tactically capturing gains through small increases down the credit-quality spectrum.")

[fred495]

I don't know if OSTIX is one of the funds that's trading in dangerous territory lately. However, per M*: "Osterweis Strategic Income is a unique high-yield offering with a strong risk-adjusted return profile, particularly over the longer term."

It's a short term, high yield bond fund that hasn't been mentioned on this board.

M* rates the fund's risk as "low". I am using this fund along with NVHAX and RCTIX in the bond portion of my portfolio. While its YTD total return is "only" 4.2%, its 3, 5, 10 and 15 year returns range consistently between 5 and 6%. The fund's average effective duration is currently 1.9, and the standard deviation 5.7.

As a conservative and retired investor, I am quite happy with OSTIX's consistent performance over the past 15 years.

Fred

[Chahta]

Jul 17, 2021 2:32:03 GMT fred495 said:

I don't know if OSTIX is one of the funds that's trading in dangerous territory lately. However, per M*: "Osterweis Strategic Income is a unique high-yield offering with a strong risk-adjusted return profile, particularly over the longer term."

It's a short term, high yield bond fund that hasn't been mentioned on this board.

M* rates the fund's risk as "low". I am using this fund along with NVHAX and RCTIX in the bond portion of my portfolio. While its YTD total return is "only" 4.2%, its 3, 5, 10 and 15 year returns range consistently between 5 and 6%. The fund's average effective duration is currently 1.9, and the standard deviation 5.7.

As a conservative and retired investor, I am quite happy with OSTIX's consistent performance over the past 15 years.

Fred

I am curious how long you have owned OSTIX. I don't remember you mentioning it before. I owned it a few years ago and think about it now and then. Thanks.

[paulr888]

I am conservative and retired and also owned OSTIX many moons ago. I now own a another strategic income fund, TSIIX. While overall a pretty close horse race in performance, there are other reasons that OSTIX is not a portfolio fit for me.

- I generally prefer higher quality bonds. Some of my other funds give me yield with some lower quality bonds so I don't want to add a fund with a huge dose of lower quality. OSTIX has only 2% IG.
- TSIIX lost a little less in March 2020.
- TSIIX has a little higher yield,
- TSIIX has a little lower ER.
- TSIIX has more diversification with 50% Corporate and 34% Securitized vs OSTIX with 91% Corporate.

[Chahta]

But TSIIX = Multi-sector with 50% IG and OSTIX = High yield (junk corp) with virtually no IG. Not sure it is fair comparison.

[yogibearbull]

Chahta , OSTIX site bills it as multisector/strategic income, but it tends to go very overweight in some area(s), now (and for a while) HY and convertibles (Other/Not Classified). M* classification and Portfolio tab catches what the fund has been doing vs what it has been saying.
www.osterweis.com/mutual_funds/strategic_income

M* Analyst Report notes a small team of 3 portfolio managers without any analyst/research/resource support. Moreover, the lead manager Kaufman was also named the Co-CEO of the firm. And that may affect how it operates.

At one time, this used to be a popular MS fund at M*. I used to note then too that it was mostly HY but it was said then that it would move into other areas as they became attractive but it never did.

Firm is undergoing transition as firm founder and Chairman Osterweis is planning to retire.

[Chahta]

OK. I was using the M* descriptions. But at this point OSTIX a junk bond fund with a B rating.

[paulr888]

Well whatever I do not need a dedicated junk bond fund as I have enough junk bonds in my other bond funds where I am stretching a little for yield.  But I understand that some people love junk bonds, taxable and Municipals.  Just not me.  

[fred495]

Jul 26, 2021 14:34:50 GMT Chahta said:

Jul 17, 2021 2:32:03 GMT fred495 said:

I don't know if OSTIX is one of the funds that's trading in dangerous territory lately. However, per M*: "Osterweis Strategic Income is a unique high-yield offering with a strong risk-adjusted return profile, particularly over the longer term."

It's a short term, high yield bond fund that hasn't been mentioned on this board.

M* rates the fund's risk as "low". I am using this fund along with NVHAX and RCTIX in the bond portion of my portfolio. While its YTD total return is "only" 4.2%, its 3, 5, 10 and 15 year returns range consistently between 5 and 6%. The fund's average effective duration is currently 1.9, and the standard deviation 5.7.

As a conservative and retired investor, I am quite happy with OSTIX's consistent performance over the past 15 years.

Fred

I am curious how long you have owned OSTIX. I don't remember you mentioning it before. I owned it a few years ago and think about it now and then. Thanks.

Chahta: "I bought shares in OSTIX about a month ago and, like you, I also owned the fund a few years ago."

As I said, I was drawn to OSTIX because of its consistent total return performance of between 5 and 6% over the past 3, 5, 10 and 15 years, and its low duration during this rather uncertain interest rate environment. But, I think the odds are that rates will go up in the future, rather than down. 

Just to round out the picture, in addition to the reasons I already mentioned, OSTIX is also a good fit for my portfolio since I wanted a fund to complement my other bond funds. RCTIX, for example, is heavily concentrated in securitized issues. OSTIX, on the other hand, is primarily focused on the corporate sector, and NVHAX on munis.

Thanks, as always, appreciate your comments and suggestions. So far, so good.

Fred

[FD1000]

I never owned HY funds for months or long term. This category is usually too volatile and correlates to stocks.
OSTIX is mostly shorter term high yield over many years. Owning or not depends on someone goals and style.  Someone may own it in lieu of stocks or allocation funds, who knows.
If you owned it for years, it's not bad.

In my specific case, if I buy it as a trade, I would use a better performing HY funds. I don't base my decisions on March 2020 which was a black swan.
Below are ARTFX,SEMMX,OSTIX.
You can see that prior to 02/2020 SEMMX had better performance+SD.  ARTFX had better performance.
March 2020= It's not going to happen in the next several months
For one year: OSTIX still lags.
For one month: I don't like OSTIX -0.6% decline in July 10-19

Today: down -0.34% is too much for a ST HY fund.  HYG(index) -0.13%...ARTFX -0.1

Attachments:

[fred495]

Jul 27, 2021 21:51:22 GMT FD1000 said:

OSTIX is mostly shorter term high yield over many years. Owning or not depends on someone goals and style.  

Today: down -0.34% is too much for a ST HY fund.  HYG(index) -0.13%...ARTFX -0.1

Looks like you made a typo in your above post, FD.

Today, 7/27, OSTIX is down 0.09% not 0.34%. The NAV today is 11.61, as reported by Fidelity, M* and Yahoo. Yesterday it was 11.62.

Fred

[FD1000]

When I looked just after 6 PM is showed -0.04 and -0.34% at Yahoo and Fidelity.
The strange thing, Yahoo price at the top is 11.61 but 1.58 for history prices and there were no distributions.

Attachments:

[Chahta]

Jul 17, 2021 2:32:03 GMT fred495 said:

I don't know if OSTIX is one of the funds that's trading in dangerous territory lately. However, per M*: "Osterweis Strategic Income is a unique high-yield offering with a strong risk-adjusted return profile, particularly over the longer term."

It's a short term, high yield bond fund that hasn't been mentioned on this board.

M* rates the fund's risk as "low". I am using this fund along with NVHAX and RCTIX in the bond portion of my portfolio. While its YTD total return is "only" 4.2%, its 3, 5, 10 and 15 year returns range consistently between 5 and 6%. The fund's average effective duration is currently 1.9, and the standard deviation 5.7.

As a conservative and retired investor, I am quite happy with OSTIX's consistent performance over the past 15 years.

Fred

Using PV Backtest, OSTIX holds up well using PIMIX, PTIAX and MMHAX as part of long term holds to produce 4-5% income over the last 15 years. There was portfolio growth as well.

[kinkelly]

I have used PHYZX for HY bonds for quite a few years, just a suggestion if anyone wanted another option in this space.

[Chahta]

Looks like a high flyer for sure and PGIM is a good family. The draw of OSTIX is the low duration.

kinkelly how long have you owned it?

Welcome on your first post. How about going to the "New Member Intro" thread and tell us about you?

[kinkelly]

Chanta, I’ve owned PHYZX since 2015. I will go to New Member Intro as you suggested.