the category was created to provide a classification for the large number of new funds created in the wake of financial crisis of the last decade. this is in contrast to more traditional bond fund categories, such as intermediate bonds or short-term bonds, that have much narrower mandates.initially, many non-traditional bonds funds were designed to offer absolute returns in most markets and to protect investors from the downside risk of higher interest rates. from 2008 through may of 2015 the number of funds in the category grew from 24 to 120.
he builds the fund’s portfolio to incorporate holdings across a range of risk factors including interest rate, credit, currency, volatility and liquidity. swell made the point that these funds were not meant to be a product to combat rising interest rates, but rather a place where managers can invest in their best ideas to generate both income and portfolio stability. the fund’s duration will fall in the range of negative two years to positive seven years.
the nontraditional bond fund sector continues to attract inflows and new products . these funds had net flows of almost $25 billion through aug. while some advisers and fixed-income experts recommend bond allocations should investors younger than 40 do about investing in bonds or bond funds? president and chief investment officer at harvest financial partners in paoli, pa. conventional wisdom says that a safety net fund should be held in a savings to a blended growth fund with 45% invested in bonds during the financial crisis, 2.5 %-3% on bond funds is a decent return and relatively safe considering interest rates over the past few years and your age. vanguard bond funds help give you the income and stability you need from your investments. wealthfront, vanguard, index funds, roth ira, non traditional bond definition
given many of the comments of the morningstar panelists and others i would agree that these funds belong more in the alternatives camp than the fixed-income camp when financial advisors look to use them as a tool in client portfolios. the low correlations that many of these funds have to the barclay’s aggregate can make them a solid choice for client portfolios. as with anything else, financial advisors need to look hard at any fund in this category that they may be considering.