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By Kenneth Oshodi | 08-17-2017 02:00 PM

This Short-Term Bond Fund Is on Our Radar

Thompson Bond's strong performance, experienced team, patient process, and strong results make it one to watch.

Kenneth Oshodi: Thompson Bond has a stable and experienced team, straightforward and consistent process, and category-topping returns since inception. And though it hasn't garnered as much attention as some of the better-known names in its short-term bond category, it's come onto our radar here at Morningstar.

Managers John W. Thompson, James Evans, and Jason Stephens use fundamental analysis across a portfolio of corporate, government, and agency debt to maximize yield. And although the team's goal here is to adjust the portfolio to take advantage of a variety of market opportunities, this fund consistently holds much more corporate and BBB-rated exposure than its median peer and its Bloomberg Barclays US Govt/Credit 1-5 YR Index benchmark.

This credit-heavy approach has led to several severe bouts of volatility and underperformance in the past. But the team is willing to deal with momentary of pain in pursuit of long-term gains, and their patient approach has certainly paid off. This fund's 5.8% annualized return over 10 years through July 31, 2017, is best in category.

With that said, fees for this fund are above-average among short-term peers, which is especially meaningful in this low-yielding category. But the fund's positives, which include a long-tenured team, effective process, and strong performance, help to make this a bond fund that investors should have on their radar.

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