Why I Still Like DoubleLine Total Return As A Core Bond Holding

It’s important to remember that DBLTX is not a “go anywhere, do anything” strategy. It’s going to behave like a bond fund, not like a stock fund or alternative investment strategy. The manager has guidelines that allow a certain degree of flexibility, but it is ultimately going to be directed by the interest rate and credit environment in any given year.

While the timing is difficult to ascertain, there will almost certainly be periods of sharply rising interest rates on the horizon.   I believe that this is where the managers of active mutual funds such as DBLTX can add the most value versus passive indexes.

Treasury and investment grade-heavy benchmarks with intermediate term durations are going to underperform in a rising rate environment. The longer the duration or higher quality the bonds, the greater volatility that index will endure. However, an actively managed fund that can lower its duration and adjust its holdings to coincide with pockets of value or momentum will likely continue to earn its keep and outpace the competition.

The Bottom Line

Doubleline has been in the right places at the right times over the last several years. However, that doesn’t make them infallible to an incorrect call on interest rates or underperformance as bond market trends change. As with any active strategy, it’s important to regularly monitor the fund’s performance versus its peer group and benchmark to ascertain that they are achieving returns in line with your goals and realistic expectations.

This article is brought to you courtesy of David Fabian.

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