Digging For the Diamonds in the Alt Bond Funds Rough
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Friday, June 07, 2013

Digging For the Diamonds in the Alt Bond Funds Rough

Finding a worthy mutual fund in Morningstar's Nontraditional Bond fund category takes patience, and if you're up for the task of digging, be prepared to be disappointed.

And be hopeful to find something extraordinary.

In 2011, thanks to the success of alt funds, Morningstar created its nontraditional division,Bloomberg reports. But it's not the most coherent category.

Bloomberg asserts that pretty much the only thing consistent to the group is how the funds are advertised.

There are a variety of reasons why the category is so cluttered. For starters, many of them are too new to be proven able to endure. Only 11 of the category’s 55 funds existed during 2008’s credit crisis. None has been tested in a strong rising rate environment.

Then, there's the problem of vagueness. How can these alt funds—on one hand praised for their diversity—stand out as a distinct category to prevent confusion and hold their own?

For more, see the full story here.

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