LB Rating: Loomis Sayles Investment Grade Bond Fund (LIGRX)


Symbol: LIGRX
Category: Core Bond Funds
Style: Active
LB Rating: ***  3 Stars
Last Updated: 9/12/12

Useful Links:
Choosing a Bond Fund with LB Ratings
About Core Bond Funds
Bond Mutual Funds vs. Bond ETFs
Passive vs Active Bond Funds


Loomis Sayles Investment Grade Bond Fund Overview

Summary: The Loomis Sayles Investment Grade Bond Fund is a great fund, except that it has a very high front-end load.  The fund charges 4.5% upfront for deposits under $100,000.  If you can get your hands on the Y class shares that don’t have a load fee, and are comfortable with a bumpy ride, this would be an excellent choice for a core bond fund. (learn more about mutual fund fees here)

Commentary: Loomis Sayles fixed income products have a reputation for taking risk.  In particular, they are not scared to take on credit risk.  The average bond rating in this “investment grade” fund is BBB, which is the lower end of the investment grade ratings.  However, Dan Fuss and his team have established a reputation for being astute with their credit research.

In addition to taking on credit risk, the Loomis Sayles Investment Grade Bond fund makes bets on currencies.  The fund can invest in Canadian dollar denominated debt without limitation.  The fund currently has about 15% of its holdings in Canadian dollar denominated bonds.  To put that in perspective, that means a 7% rise in the Canadian dollar would add about 1% to the fund’s returns.

It can also put up to 20% of its holdings in bonds which are not denominated in US or Canadian dollars.


Loomis Sayles Investment Grade Bond Fund Rating Criteria

Short-Term Performance: Excellent The fund has outperformed its benchmark over the last 12 months and 3 years.  Performance is particularly strong over the last 3 years, with an annualized return of 10.02%.

Long-Term Performance: Excellent Fund has outperformed its benchmark over the last 5 years and 10 years.

Returns relative to Risk: Average  The fund takes an extensive amount of credit risk.  It has an average credit rating of  BBB, only two notches away from junk. While the returns of the fund are great, the Loomis Sayles Investment Grade Bond Fund has above average volatility.

Fees: Poor The front-end sales load is very high, starting at 4.5%.  Typically, Learn Bonds will not provide a rating higher than 3 stars for any fund that has a sales load.  At 0.81% the annual expense ratio for the fund is average.

Manager Tenure: Excellent  The Fund’s lead manager Dan Fuss has been at the helm for over 16 years. His three co-managers have been in place since 2006.

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