Safe Yields by Lipper Category

Chart #1 shows Total Return for the past 12 months of funds in Lipper Categories versus risk as measured by the Ulcer Index which is based on the length and duration of drawdowns. Three clusters of categories can be seen. The upper leftmost cluster are those with low risk and higher returns. The size of the sphere is proportional to the yield. The lower left most cluster are those with lower returns and higher risk. The center cluster represents those with moderate risk and returns. What the chart shows is that most higher yielding funds have higher risk.

Figure #1: Seeking Yield with Low Risk

Seeking Yield With Low RiskSource: Created by the Author Based on Mutual Fund Observer Screens

Table #1 contains the data used in Chart #1. All categories have at least 2% yield. The green area is the low risk categories with moderate 12-month returns. The yield divided by Ulcer Index represents the yield that an investor receives for the risk (Ulcer Index) that they are taking. Martin Ratio is the risk free, risk-adjusted return. The yellow cells contain categories that have slightly more risk, decent 12-month returns and slightly higher yields. The categories in the red shaded area are higher risk categories which have also had lower returns. I added a fourth category of funds that have exhibited low risk, but I believe with COVID recurring in some regions have higher risk. The top two categories are the ones where I prefer to invest.

Table #1: Lipper Categories by Return, Yield and Risk

Source: Created by the Author Based on Mutual Fund Observer Screens

Table #2 contains some of the top-ranked funds from my ranking system based on risk, risk-adjusted returns, momentum, income, and quality. These correspond to the green shaded “lowest risk” categories in Table #1 above.

Table #2: Group #1: Lowest Risk Category – Top-Ranked Funds

Rank Symbol Name APR MAXDD Ulcer Index Martin Ratio Yield
100 TMSRX T. Rowe Price Multi-Strat Tot Rtn 10.3 -4.7 1.4 6.9 2.4
97 BNDX Vanguard Tot Intern Bond 2.2 -2.5 0.9 1.6 3.2
95 VTABX Vanguard Tot Intern Bond 2.1 -2.5 1.0 1.5 3.2
94 OSTIX Osterweis Strat Inc 4.4 -7.6 3.0 1.2 4.3
93 DRSK Aptus Defined Risk 15.4 -2.7 0.9 16.6 1.4
92 PFFD Global X US Prfrd 4.1 -13.3 4.9 0.7 5.5
91 FIXD First Trust Opport Fxd Inc 8.2 -1.1 0.4 19.9 2.0
90 PREF Principal Spectrum Prfrd Sec Active 5.7 -13.7 4.6 1.1 4.7
89 IAGG iShares Core Intern Agg Bond 2.1 -2.2 0.8 1.7 2.1
83 ADVNX Advisory Research Strat Inc 8.3 -3.3 1.0 7.7 2.5
81 DIAL Columbia Diversified Fxd Inc Alloc 6.4 -5.5 1.7 3.3 2.8
79 FCDSX Fidelity Series Intern Credit 5.8 -8.0 2.7 1.9 2.9
78 GPAIX Grant Park Multi Alt Strat 4.1 -2.0 0.7 5.0 11.2

Source: Created by the Author Based on Mutual Fund Observer Screens

Table #3 contains some of the top-ranked funds from categories corresponding to the yellow shaded “low risk” categories in Table #1 above. Note that while the categories, on average, are riskier than those in Table #2, these funds have low Ulcer Indexes and are suitable for most investors.

Table #3: Group #2: Low Risk Category – Top Rated Funds

Rank Symbol Name APR MAXDD Ulcer Index Martin Ratio Yield
99 ISTB iShares Core 1-5 Year USD Bond 4.6 -1.2 0.3 11.5 2.4
99 VCOBX Vanguard Core Bond 9.1 -0.8 0.4 21.0 2.1
99 VBIIX Vanguard Inter-Term Bond Index 8.8 -1.4 0.5 16.7 2.3
99 EXCPX Manning & Napier Uncons Bond 5.8 -4.6 1.5 3.3 2.6
99 VFSTX Vanguard Short-Term Invest-Grade 4.8 -3.1 0.9 4.4 2.4
99 SWAGX Schwab US Agg Bond Index 6.8 -0.8 0.4 17.0 2.5
98 SCHZ Schwab US Agg Bond 7.0 -0.9 0.4 17.0 2.5
97 SUBFX Carillon Reams Uncons Bond 8.5 -3.0 0.9 8.9 2.4
97 NUBD Nuveen ESG US Agg Bond 7.1 -1.1 0.5 13.9 2.3
97 FNDSX Fidelity Sustainability Bond Index 7.1 -0.9 0.4 17.7 2.1
96 SPSB State Street Short Term Corp Bond 4.0 -2.5 0.7 4.6 2.3
95 PBDIX T. Rowe Price US Bond Enh Index 7.3 -1.7 0.6 11.7 2.4
95 FSIGX Fidelity Series Invest Grade Bond 8.5 -3.0 0.9 8.7 2.7
95 DODIX Dodge & Cox Inc 7.7 -3.1 0.9 7.6 2.6
95 IUSB iShares Core Tot USD Bond 6.7 -2.0 0.6 9.4 2.7
93 SWSBX Schwab Short-Term Bond Index 4.7 -0.1 0.0 124.0 1.8
92 PRWBX T. Rowe Price Short-Term Bond 4.3 -2.7 0.8 4.3 2.1
92 VBISX Vanguard Short-Term Bond 4.7 -0.1 0.0 238.0 1.9
87 FTHRX Fidelity Inter Bond 6.5 -2.5 0.7 7.8 2.2
86 BSBAX Northern Trust Short Bond 3.5 -2.0 0.6 4.5 2.1
85 BAB Invesco Taxable Municipal Bond 6.6 -6.6 3.0 2.0 3.2
84 JANFX Janus Henderson Flexible Bond 9.0 -3.3 1.0 8.3 2.5
84 FNSOX Fidelity Short-Term Bond Index 4.7 -0.1 0.0 132.0 1.7
83 FSHBX Fidelity Short-Term Bond 3.9 -1.6 0.4 7.0 1.9

Source: Created by the Author Based on Mutual Fund Observer Screens

Top-Ranked Lipper Categories

Table #4 contains the top-ranked Lipper Categories from my ranking system of over a thousand mutual funds, exchange traded funds and closed end funds. Bear refers to the average performance during the past three recessions. The funds are separated into nine buckets based on risk or characteristics.

Table #4: Top-Ranked Categories

Lipper Category Data Rank Ulcer MaxDD Martin Yield RTN 3Mos APR Bear
S&P 500 Index 79 7.0 (19.6) 2.0 1.8 8.9 15.1 (28.6)
Bucket 1: Safety Rank Ulcer MaxDD Martin Yield RTN 3Mos APR Bear
1. Short-Intmdt Invst Grade Debt 91 0.5 (1.8) 23.7 2.3 0.6 5.1 2.4
2. GNMA 89 0.1 (0.2) 40.4 2.0 (0.0) 3.8 6.5
3. Core Bond 88 0.6 (1.7) 17.6 2.4 1.0 7.3 4.6
4. U.S. Gov Short 85 0.1 (0.2) + 1.7 0.3 3.3 5.0
Bucket 2: 1 to 2 Years Rank Ulcer MaxDD Martin Yield RTN 3Mos APR Bear
1. Mxd-Ast Trgt Today 74 1.9 (6.1) 3.9 2.7 2.9 7.1 (6.8)
2. Mxd-Ast Trgt Alloc Consv 73 2.6 (7.7) 4.4 1.9 2.8 7.0 (6.1)
3. Core Plus Bond 69 1.0 (3.2) 5.9 2.6 1.1 6.2 5.0
4. Corp Debt A Rated 66 2.0 (5.1) 5.1 2.9 1.3 10.8 3.5
5. U.S. Treasury Gen 44 1.6 (3.3) 10.6 1.8 0.1 13.3 13.8
Bucket 3: 3 to 4 Years Rank Ulcer MaxDD Martin Yield RTN 3Mos APR Bear
1. Convertible Securities 84 4.7 (14.9) 7.0 2.4 13.7 33.7 (22.7)
2. Mxd-Ast Trgt Alloc Mod 71 4.1 (11.9) 2.2 1.8 4.8 9.0 (14.8)
3. Mxd-Ast Trgt Alloc Growth 70 5.6 (15.8) 2.1 1.8 6.3 11.4 (19.4)
Bucket 4: 4 to 5 Years Rank Ulcer MaxDD Martin Yield RTN 3Mos APR Bear
1. S&P 500 Index 79 7.0 (19.6) 2.0 1.8 8.9 15.1 (28.6)
2. Mxd-Ast Trgt 2040 62 6.3 (16.7) 1.7 3.7 6.6 10.5 (27.6)
3. Consumer Goods 57 6.5 (16.3) 1.3 1.9 9.7 8.7 (13.6)
Municipal Bonds Rank Ulcer MaxDD Martin Yield RTN 3Mos APR Bear
1. Muni Short Debt 81 0.3 (0.8) 5.8 1.4 0.4 2.3 3.3
2. Muni Short-Intmdt Debt 78 0.8 (1.9) 3.9 1.6 0.9 3.6 4.0
3. Muni Gen & Ins Debt 74 2.3 (5.9) 1.7 2.4 1.3 3.8 2.8
Yield Rank Ulcer MaxDD Martin Yield RTN 3Mos APR Bear
1. Income & Preferred Stock 99 2.5 (7.8) 1.4 6.0 1.9 4.2 (14.1)
2. Flexible Income 86 3.9 (11.0) 3.5 4.4 5.0 5.8 (26.9)
3. U.S. Mortgage 76 0.3 (0.7) 42.8 2.5 0.5 4.7 5.4
4. Retirement Income 73 3.1 (8.7) 2.4 1.8 3.4 6.2 (16.6)
5. Gen Bond 69 2.0 (5.3) 5.7 2.7 1.3 7.9 (0.3)
6. Corp Debt BBB-Rated 69 1.7 (5.4) 5.1 3.1 1.3 7.9 2.0
Inflation Resistant Rank Ulcer MaxDD Martin Yield RTN 3Mos APR Bear
1. Inflation Protected Bond 90 0.5 (1.6) 18.4 1.1 3.0 10.0 5.3
2. Real Return 45 6.6 (13.7) (0.4) 2.4 3.4 (2.0) (17.6)
Global & International Bonds Rank Ulcer MaxDD Martin Yield RTN 3Mos APR Bear
1. Global Income 64 2.1 (6.1) 2.8 2.6 2.1 4.6 1.9
2. Global High Yield 64 5.6 (14.1) 0.3 4.8 4.4 2.6 (10.7)
Global & International Equity Rank Ulcer MaxDD Martin Yield RTN 3Mos APR Bear
1. Global Multi-Cap Growth 65 5.6 (16.8) 5.9 0.5 11.0 31.5 (27.6)
2. Pacific Region 65 8.2 (19.5) 2.0 2.1 7.7 13.2 (30.2)
3. Global Health Biotech 61 3.9 (10.8) 6.1 1.2 3.8 23.7 (14.1)
Gold & Alternatives Rank Ulcer MaxDD Martin Yield RTN 3Mos APR Bear
2. Alt Event Driven 72 2.7 (7.2) 4.1 1.7 4.6 8.5 (2.5)
3. Alternative Multi-Strategy 67 1.9 (5.5) 4.3 3.7 3.1 7.1 (11.9)
4. Absolute Return 65 2.7 (6.4) 11.5 1.2 2.7 21.0 9.6
5. Alt Credit Focus 63 1.9 (5.4) 3.9 3.0 2.6 5.6 (4.8)

Source: Created by the Author Based on Mutual Fund Observer Screens

Of the more than a thousand funds that I extracted from Mutual Fund Observer for September, Table #5 contains the Categories with the highest fund flows. As a cautionary note, some categories do not have many funds. In general, materials and natural resources, growth, and industrials attracted funds. Some investors may be rebalancing to short term bonds. I also note that absolute return funds are attracting funds.

Table #5: Categories with High Fund Flows

Fund Flows Rank Flow Ulcer MaxDD Martin RTN 3Mos APR Bear
1. Basic Materials 37 7.6 10.8 (26.5) 1.1 11.8 13.1 (37.5)
2. Intrntnl Large-Cap Growth 57 7.3 6.7 (17.6) 3.6 9.9 21.4 (29.8)
3. Global Natural Resources 20 6.9 17.5 (32.2) (0.6) 1.4 (12.3) (25.9)
4. Global Multi-Cap Growth 65 6.6 5.6 (16.8) 5.9 11.0 31.5 (27.6)
5. Multi-Cap Core 48 6.0 7.7 (20.6) 1.8 8.3 13.2 (28.5)
6. Absolute Return 65 5.9 2.7 (6.4) 11.5 2.7 21.0 9.6
7. Pacific Ex Japan 60 5.5 6.3 (16.7) 5.7 9.9 26.6 (33.1)
8. Ultra-Short Obligations 78 5.2 0.4 (1.3) 8.5 0.3 2.0 2.9
9. Industrials 21 4.4 12.8 (27.2) 0.2 9.8 0.4 (27.1)
10. Small-Cap Growth 36 3.9 8.4 (23.9) 3.1 9.3 21.3 (28.2)

Source: Created by the Author Based on Mutual Fund Observer Screens

Table #6 contains the top-ranked funds for Charles Schwab, Fidelity, and Vanguard mutual funds, closed end funds, and exchange traded funds. These correspond to the top rated categories in the previous table.

Table #6: Top-Ranked Funds from Top-Ranked Categories

Source: Created by the Author Based on Mutual Fund Observer Screens

Since closed end funds tend to be more volatile, I am more selective when screening them. Table #7 contains the top-ranked closed end funds.

Table #7: Top-Ranked Closed End Funds

Closed End Funds
Symbol Name Bucket Author’s Rank YTD 1 Year Ulcer Index Martin Ratio Yield
TSI TCW Strategic Income Income 99.3 3.1 4.2 2.5 1.4 6.0
BME BlackRock Health Sciences Trust Bucket #4 96.0 8.8 22.9 4.0 5.5 5.6
MIN MFS Intermediate Income Trust Income 95.7 6.6 7.0 0.7 9.6 8.6
NUV Nuveen Municipal Value Municipal Bond 91.7 2.6 3.1 3.3 0.7 3.5
NIE AllianzGI Equity & Convertible Income Bucket #3 90.6 18.3 28.7 4.9 5.7 5.5
NXR Nuveen Select Tax-Free Income Portfolio 3 Municipal Bond 89.3 3.5 4.0 2.8 1.2 3.1
CLM Cornerstone Strategic Value Bucket #4 81.9 6.2 14.2 6.5 2.1 23.6
BUI iShares Util Infra & Power Oppor Bucket #3 77.2 2.1 8.1 7.9 0.9 6.8
ETJ Eaton Vance Risk-Managed Div Equity Income Alternatives 75.7 12.5 17.7 1.7 10.2 9.3

Source: Created by the Author Based on Mutual Fund Observer Screens

Table #8 contains top-ranked funds from other mutual fund families. I own COTZX and TMSRX.

Table #8: Top-Ranked Mutual Funds From Other Families

Other Fund Families
Symbol Name Bucket Author’s Rank YTD 1 Year Ulcer Index Martin Ratio Yield
COTZX Columbia Thermostat Inst Bucket #3 100.0 20.8 24.5 0.4 64.5 1.7
TMSRX T. Rowe Price Multi-Strategy Total Return Alternatives 99.5 8.3 10.3 1.4 6.9 2.4
BBNIX BBH Income Global Bond 95.6 8.3 8.3 1.5 5.1 3.0
PBDIX T. Rowe Price US Bond Enh Index Bucket #1 94.4 7.3 7.3 0.6 11.7 2.4
MAPIX Matthews Asia Dividend Inv Global Equity 92.9 14.6 22.3 7.7 2.8 1.6
OSTIX Osterweis Strategic Income Income 92.9 3.9 4.4 3.0 1.2 4.3
PRIPX T. Rowe Price Inf Prot Bond Inflation 90.5 9.1 9.8 0.4 21.7 0.4
BTTRX American Century Zero Coupon 2025 Bucket #2 86.6 9.1 8.3 0.4 21.3 3.3
ALSRX Alger Small Cap Growth Bucket #4 80.7 39.7 46.4 4.1 11.2 0.1
SCFTX Virtus Seix High Grade Muni Bond Municipal Bond 80.1 5.0 5.5 1.4 3.4 1.3

Source: Created by the Author Based on Mutual Fund Observer Screens

Short List of Funds

Chart #2 and Table #9 show a final list of funds for seeking yields with safety. The funds were chosen to have a balance of total return, yields, and low risk. One needs to take into account how these funds might perform in a low interest rate environment. I included some traditional income funds for comparison.

Chart #2: Finalist Funds

ChartData by YCharts

Table #9: Finalist Funds

Rank Symbol Name Lipper Category APR MAXDD Ulcer Index Martin Ratio Yield
100 BBNIX BBH Income I Global Income 8.3 -4.8 1.5 5.1 3.0
97 EXCPX Manning & Napier Unconstrained Bond Series S Absolute Return Bond 5.8 -4.6 1.5 3.3 2.6
95 LASYX Natixis Loomis Sayles Strategic Alpha Y Absolute Return 6.1 -6.2 2.1 2.5 2.4
94

SUBFX

Carillon Reams Unconstrained Bond I Absolute Return Bond 8.5 -3.0 0.9 8.9 2.4
93 MIN MFS Intermediate Income Trust Corporate Debt BBB-Rated 7.0 -2.3 0.7 9.6 8.6
92 VTABX Vanguard Total International Bond Index Admiral International Income 2.1 -2.5 1.0 1.5 3.2
91 SWLRX Schwab Monthly Income — Maximum Payout Retirement Income 5.0 -3.7 1.1 3.9 2.4
90 VASIX Vanguard LifeStrategy Income Inv Mixed-Asset Target Alloc Consv 6.8 -4.3 1.3 4.7 2.4
89 TMSRX T. Rowe Price Multi-Strategy Total Return Alternative Multi-Strategy 10.3 -4.7 1.4 6.9

2.4

Source: Created by the Author Based on Mutual Fund Observer Screens

What’s Next?

My past few articles have been on Flexible Portfolio Funds, Alternatives, and Absolute Return Funds, among others. My investing objective is to build a low risk portfolio suitable for this environment with high valuations and low interest rates. This article is the basic research for low risk funds with above-average yields. These are a few ideas that I will be looking into further in my next article on Mutual Fund Observer.

Disclosure: I am/we are long COTZX, TMSRX, FMSDX, FIKFX, FTHRX, DODIX, SWLRX, VEMBX, VTABXVTINX, VBIIX, VGSTX, VWIAX. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I am an engineer with an MBA nearing retirement and not an economist nor an investment professional. The information provided is for educational purposes and should not be considered as advice. Investors should do their due diligence research and/or use an investment professional. In September 2019, I began contributing to the Mutual Fund Observer monthly newsletter.

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