Morningstar isn't impressed by alternative bond funds at the moment. Analyst Nadia Papagiannis gave alternative bond funds overall a C grade for May performance, InvestmentNews reported. Papagiannis said the bad May performance can be blamed on managers' not being hedged against rising interest rates. On average, the funds finished May with a 0.46 percent loss.

Some alternative bond funds performed well however. In May the $528 million Driehaus Select Credit Fund (SUBFX) [profile] gained 1.2 percent and $370 million Scout Unconstrained Bond Fund (DRSLX) [profile] gained 1 percent. 

Edited by: Casey Quinlan


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