Nontraditional Bond Medalist Funds

Nontraditional bond funds are like the grade-school kids that liked to color outside the lines. Here, the strategies often have very limited portfolio constraints on exposure to credit, sectors, currency, or interest-rate sensitivity. They may also have exposure to a mix of factors such as absolute return mandates (goals of producing returns not correlated with the overall bond market), performance benchmarks based on ultra-short-term interest rates (such as T-bills), and the ability to use a broad range of derivatives for market- and security-level positions. We narrow the list to those strategies that also received a Gold, Silver, or Bronze Medalist Rating by our analysts. The Morningstar Medalist Rating is the forward-looking assessment of an investment strategy. The rating is on a five-tier scale running from Gold to Negative. For actively managed funds, Morningstar assigns Gold, Silver, and Bronze ratings to vehicles expected to add value over the long term when compared with a relevant Morningstar Category index after accounting for fees and risk. For passive strategies, funds and ETFs with the top ratings are expected to deliver alpha that exceeds the lesser of the category median net alpha, or zero, over the long term.