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Loomis Sayles Bond's deep and seasoned team, contrarian strategy, and solid long-term returns count in its favor. That said, modest concerns surrounding the fund's equity stake support a downgrade of its Morningstar Analyst Rating to Silver.
Long known for its founder Dan Fuss' benchmark-agnostic approach to investing, this experienced team doesn't shy away from risk. Over time, sizable allocations to non-U.S.-dollar-denominated bonds and a large corporate stake, including junk-rated fare, have dominated the portfolio. At the same time, the portfolio's typically mid-single-digit common stock stake distinguishes it from the majority of its multisector bond Morningstar Category peers, while concentration in this stake adds idiosyncratic risk. For example, in late 2016 the portfolio's combined position in Intel (INTC) stock and an equity-sensitive convertible topped 8%. The team eventually sold that name but bought a 3% position in AT&T (T) common stock in late 2018's volatile markets, part of a 7% allocation to equities at year-end. The team cited that company's generous free cash flows, strong competitive position, and plump yield.
Sarah Bush does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.