The team at a $26-billion-AUM fund firm in the Southland is celebrating a big milestone for one of their bond funds.

Abhijeet V. "Abhi" Patwardhan First Pacific Advisors, LP Partner, Portfolio Manager

Last month was the 40th anniversary of the FPA New Income Fund. Los Angeles-based First Pacific Advisors, LP (FPA [profile]) serves as advisor to the actively managed fixed income fund, which has been PMed for nine years by FPA partner Abhi Patwardhan.

FPA New Income's inception date was July 11, 1984. As of June 30, 2024 (shortly before the fund's 40th birthday on July 11), the fund had $8.47 billion in AUM. It comes in two flavors: investor shares (FPNRX), with an expense ratio of 55 basis points, baking in a 24bps expense reimbursement; and institutional shares (FPNIX), with an expense ratio of 45bps, including a 14bps expense reimbursement. (Both reimbursements are promised through April 30, 2025.)

The longstanding fund is a series of the Investment Managers Series Trust III (fka the FPA Funds Trust, prior to January 10 of this year). Patwardhan has PMed the fund (which went through a slight name change in July 2023, after reopening to new investors in 2022 following a 2020 soft close) since 2015. Earlier, the fund was PMed by star portfolio Bob Rodriguez (who, among other accolades, is a fund manager of the year winner).

In an eight-page letter to investors to highlight the anniversary, Patwardhan lays out the fund's success, generating what he describes as "the best risk-adjusted returns over 40 years" compared to the few other short-term and intermediate core bond funds that have lasted that long.

"Not only has the Fund delivered better or comparable total returns over 40 years, but that performance has come with fewer and less severe drawdowns along the way and, particularly recently, with upside participation," Patwardhan writes. "Because of these lower volatility returns, we believe the fund has been relatively easy to own ... Doing a much better job of protecting capital during periods of turmoil over the past 40 years left the Fund well-placed to take advantage of attractively-priced investment opportunities created by the turmoil."

Patwardhan explains the approach powering FPA New Income by hearkening back to Rodriguez's words in a 1994 letter to shareholders to mark the fund's 10th anniversary. Rodriguez emphased the fund's flexibility and its focus on long-term total return.

"Our success has emanated from the basic strategy of winning by not losing," Rodriguez wrote in that 1994 letter.

"The past 40 years have brought many challenges (and, in some cases, opportunities), including multiple distressed debt cycles, a Global Financial Crisis, novel monetary policy, a pandemic, multiple market bubbles, and the end of a multi-decade bull market in bonds, among other things," Patwardhan writes. "Through it all, we have achieved better risk-adjusted returns because we have been guided at all times by the investment philosophy that Bob articulated above and established in 1984: winning by not losing." 

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