Sarah Bush: Prudential Total Return--soon to be renamed PGIM Total Return--is an impressive choice in the intermediate-term bond Morningstar Category.
The fund's appeal starts with its investment team, which won Morningstar's 2017 U.S. Fixed-Income Manager of the Year honors. Managers Michael Collins, Robert Tipp, Richard Piccirillo, and Gregory Peters are an experienced crew. They work with one of the largest research teams in the business which includes roughly 100 analysts. The approach here is rooted in thorough individual security analysis and careful attention to risk. The team's focus on identifying investment opportunities backed by strong fundamentals and healthy income streams has left it with a historical tilt toward corporates. Corporate bonds accounted for close to half the portfolio as recently as late 2015. The team has trimmed this exposure some since then, adding to commercial mortgage-backed securities and other securitized fare. At the same time, the team tends to hold fairly small stakes in U.S. Treasuries and government-backed mortgages. The fund's corporate tilt, a modest-sized allocation to emerging-markets debt, and a willingness to take more interest-rate risk at times than many in the fund's category, can result in periods of volatility. Through the first four months of 2018, for example, the fund's 2.4% loss left it lagging roughly 80% of its peers.
Over the long term, however, the team has put up excellent numbers with top-notch 10-year returns. The fund's many strengths combined with an improving fee profile support its Morningstar Analyst Rating of Silver.