Even the highest quality funds can underperform expectations. Morningstar analyst ratings are forward-looking and are meant to be a gage, a prediction about a fund's future performance. Gold, Silver, Bronze, Neutral or Negative; indicate what the analyst's opinion is of the fund's future.
The 'star rating' is purely backward-looking, looking at historical returns. The top 10% of funds within a category get 5 Stars and the bottom 10% get 1 Star, and it's rated along a bell curve and so most funds will have 3 Stars.
These three bond funds have been awarded a Bronze analyst rating indicating they will perform well in the future – but only have a star rating of 1 or 2, meaning they are currently depressed in value. This could indicate a buying opportunity.
JPM Strategic Bond
We believe this fund is a strong choice for the right investor, says Morningstar analyst Emma O’Neill.
This is a flexible, best-ideas bond fund that invests across the fixed-income spectrum, though it is somewhat unusual in that it targets a return of cash +3% in the medium term. In our view, managers Robert Michele, Nick Gartside, and Iain Stealey have the experience and capabilities required to manage this proposition, supported by the significant resources of the underlying specialist sector teams.
Investec Strategic Bond
Investec Strategic Bond is a sensible choice for investors seeking a conservative strategic bond fund and willing to take a long-term approach, says O’Neill.
This fund is designed to offer a reasonably core allocation to fixed-income markets, reflected by a structural bias to investment-grade bonds, but allowing the manager the flexibility to adjust positioning according to his analysis of the market cycle and to incorporate meaningful positions in high-yield and emerging-markets bonds.
Old Mutual Global Strategic Bond
We have faith in Stewart Cowley’s ability to deliver attractive long-term returns through his flexible, unconstrained process, says Morningstar analyst Karine Glauser.
Stewart Cowley joined OMAM in 2009 as head of fixed income. Over his career, he has repeatedly proved his ability to manage funds through different market conditions according to his research-driven, thematic approach.
We used the free Morningstar FundScreener to find these highly rated underperforming funds