HEAD-TO-HEAD: Pimco vs Robeco

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The Pimco fund receives a Morningstar analyst rating of Bronze and a four-star rating, compared to a Silver and five-star rating for Robeco’s product.

Morningstar’s analyst rating is a forward-looking analysis of a fund. A Gold, Silver, or Bronze rating means Morningstar analysts expect the fund to outperform over a full market cycle of at least five years. The star rating looks at historical risk-adjusted performance.

Based on the analyst rating, Faassen chooses the Robeco fund over Pimco’s product.

Although the Robeco fund has a less resourced team, the managers are very experienced with a longer track record of managing the fund than Pimco’s managers have with their fund, Faassen said.

Another advantage of the Robeco fund is its lower fees, he added.

Notably, the Robeco fund had seen a significant inflow of about €2bn ($2.5bn) in 2016, boosting the overall fund size to $9.6bn. “But we are comfortable after seeing its outperformance during the year, despite the inflows.”

Even though the two funds employ a conservative strategy, high yield funds can still be risky, he said. “We saw the credit crisis in 2007-2008, which hit high yield really hard. We also saw the energy sector downturn in 2015.

“Investors should not allocate too much money into high yield within their fixed income allocation. High Yield bonds should be a supporting element to the overall portfolio.”

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