Like other core plus bond funds, the Nationwide Core Plus Bond Fund invests primarily in investment-grade bonds-80%. It's the 20% portion invested in high-yield bonds where the fund takes some additional risk to potentially bring in a higher return.
Core Plus Bond Fund Allocation
Subadvised by Thompson, Siegel & Walmsley LLC (TS&W), this fund strives to compensate investors for the risks they take. Rather than look at the entire range of high-yield bonds, the portfolio managers at TS&W focus on high-quality, high-yield bonds for the Nationwide Core Plus Bond Fund.
A Focus on High-Quality High-Yield Bonds
Most of the return with less risk potential
The following chart illustrates the potential value of this approach. As you can see, the lower-quality high-yield bonds (represented by the gray square) had an annualized return of 7.47% and a standard deviation of 15.82%. At the same time, the higher-quality high-yield bonds sought by the fund (represented by the green square) had an annualized return of 7.27% with a standard deviation of 8.35%. That’s 98% of the return with just 53% of the risk.
Source: eVestmentAlliance as of December 31, 2012.
Past performance does not guarantee future results. Please note that you cannot directly invest in an index.
1 Represents the type of investments TS&W may use in the high-yield space. The BofA ML U.S. High Yield BB-B Rated Constrained Index is an index that measures the performance of domestic corporate bonds rated BB to B.
2 T he BofA ML U.S. High Yield CCC and Lower Rated Constrained Index is an index that measures the performance of domestic corporate bonds rated CCC or lower.
Both of these indexes are subject to interest rate risk, credit risk and risks associated with investing in bonds rated lower than investment grade.