Young Research & Publishing Inc.

Investment Research Since 1978

Disclosure

  • About Us
    • Contributors
    • Archives
    • Dick Young’s Safe America
    • The Final Richard C. Young’s Intelligence Report
    • You’ve Read The Last Issue of Intelligence Report, Now What?
    • Dick Young’s Research Key: Anecdotal Evidence Gathering
    • Crisis at Vanguard
  • Investment Analysis
    • Bonds
    • Currencies and Gold
    • Dividend Investing
    • ETFs & Funds
    • Investment Strategy
    • Retirement Investing
    • Stocks
    • The Efficient Frontier
  • Investment Counsel
  • Retirement Compounders®
  • Free Email Signup

The 10 Largest Bond Funds

May 29, 2014 By E.J. Smith

Investors are taking on more risk—and are doing it in a major way. Bond funds, which should be your anchor-to-windward money, are loading up on junk. The below investment grade waste piling up in the 10 largest bonds funds is shocking. We’re not talking small potatoes here. These are the big dogs.

“Who wants an index fund that yields 2%?” said Jeffrey Gundlach, manager of the Total Return Bond fund at DoubleLine Capital LP. Investors “want exposure to these high-yield and distressed securities and they’ve become comfortable with what we’re doing,” he told the WSJ.

I’m not buying it.

In my close to 20 years in speaking with investors, they are never comfortable with losing money, period. It’s crucial that you pay attention to how Vanguard bond funds, which comprise five of the top ten slots, have basically zero exposure to junk. That’s one of the many reasons I advise some of these funds for clients and the same for you.

More from an excellent WSJ piece by Matt Wirz:

One concern for regulators is that if hit with a wave of redemptions from investors, the funds could have trouble unwinding their bets in the smaller high-yield markets, where trading can dry up quickly when prices start to fall.

“Sales of assets from any of those funds could create contagion effects on the related funds, spreading and amplifying the shock and its market impacts,” the Treasury said in a September report on the systemic risk posed by large fund managers.

The prospect of fire sales of bonds by large funds “may create trouble in terms of transmitting crisis from one sector of the fixed-income market to another,” said Massimo Massa, a professor at French business school Insead who studies the impact of mutual funds on markets.

Five of the top 10 bond funds by assets are managed by Vanguard, each with less than 1% invested in high-yield securities. Vanguard, based in Valley Forge, Pa., said it can offer competitive returns without buying risky debt because it charges lower management fees than competitors.

Pimco’s Total Return Bond Fund is the world’s largest and has long posted market-beating returns, but it lagged behind many rivals last year as interest rates climbed. Investors have pulled $55.3 billion from the fund since May of last year, when the Fed said it would ratchet back its bond-buying program. All told, assets in the fund posted a 17% decline last year.

Share this:

  • Email
  • Twitter
  • Facebook

You Might Also Like:

  • Junk Bond Yields
  • Junk Bonds go Bonkers
  • The Trouble with this Bond Fund
  • Author
  • Recent Posts
E.J. Smith
E.J. Smith is Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. His focus at all times is on preparing clients and readers for “Times Like These.” E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH. His first drum set was a 5-piece Slingerland with Zildjians. He grew-up worshiping Neil Peart (RIP) of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris.

Please get in touch with E.J. at ejsmith@youngresearch.com

Click here to sign up for my free monthly Survive & Thrive letter.
Latest posts by E.J. Smith (see all)
  • Is Vanguard Voting Against Your Political Beliefs? - March 23, 2023
  • “I Need Preservation of Principal and Growth” - March 22, 2023
  • Are You Fairly Wealthy? I’m Listening - March 21, 2023

Search Young Research

Most Popular

  • Are You Fairly Wealthy? I’m Listening
  • “I Need Preservation of Principal and Growth”
  • Were Silicon Valley Bank's Motivations for Taking Losses Pure?
  • Your Survival Guy’s BEST Insider’s Guide to Key West
  • Vanguard Wellesley (VWINX) vs. Wellington (VWELX): Which Fund is Best?
  • The Power of a Compound Interest Table
  • Silicon Valley Bank: What Do Investors Expect?
  • What’s Going On with Banks and Are My Deposits Safe?
  • Treasury Studying How to Increase Deposit Insurance
  • Mortgage Market Not Expected to Settle Down Soon

Don’t Miss

Default Risk Among the Many Concerns with Annuities

Risk and Reward: An Efficient Frontier

How to be a Billionaire: Proven Strategies from the Titans of Wealth

Cryptocosm and Life After Google

Warning: Avoid Mutual Fund Year End Distributions

Is Gold a Good Long-term Investment?

How to Invest in Gold

Vanguard Wellington (VWELX): The Original Balanced Fund

What is the Best Gold ETF for Investing and Trading?

Procter & Gamble (PG) Stock: The Only True Dividend King

The Dividend King of the North

You’ll Love This if You’re Dreaming of an Active Retirement Life

The Importance of a Balanced Portfolio

Invest with Peace of Mind and Comfort

What Kind of Life Are You Investing For?

RSS The Latest at Richardcyoung.com

  • Biden Embraces Modern Monetary Theory
  • Is Vanguard Voting Against Your Political Beliefs?
  • Does Anyone Still Think Ron Paul Was Wrong?
  • Rand Paul Surprises Moderna CEO with Inside Information about Myocarditis Risk
  • Hillsdale College and Victor Davis Hanson America’s Finest
  • Florida Seeks to Expand the Protection of Children
  • For the Health of the Planet
  • “I Need Preservation of Principal and Growth”
  • V4 Stands Against North African and Middle Eastern Invasion
  • America’s Colleges Have Become Progressive Liberal Rat Holes

RSS The Latest at Yoursurvivalguy.com

  • Is Vanguard Voting Against Your Political Beliefs?
  • Call It the Difference between Normal and Crazy
  • “I Need Preservation of Principal and Growth”
  • DEMOCRATIC SENATOR: Biden’s ESG Veto “Absolutely Infuriating”
  • Are You Fairly Wealthy? I’m Listening
  • How Long Is Your Water Supply Chain?
  • Your Survival Guy’s BEST Insider’s Guide to Key West
  • Be Wary of Those Who Wrap Themselves in Capes
  • For Whom Is Your Portfolio Serving?
  • ESG: Are Markets Ready for “A Needed Dose of Reality?”

About Us

  • About Young Research
  • Archives
  • Contributors

Our Partners

  • Richard C. Young & Co.
  • Richardcyoung.com

Copyright © 2023 | Terms & Conditions

loading Cancel
Post was not sent - check your email addresses!
Email check failed, please try again
Sorry, your blog cannot share posts by email.