Summary: The Lord Abbett Short Duration Income Fund is basically a short term high yield bond fund, designed for investors who are willing to stomach significantly more volatility than short term investment grade bond funds in return for significantly more yield.
Commentary: The Lord Abbett Short Duration Income Fund has a very interesting story. Up until 2007 this was a standard short term government bond fund. In 2007 the fund changed course dramatically and started investing in all sorts of riskier credits including high yield bonds, mortgages and commercial mortgage backed securities.
While 2007 may not have been the perfect time to make that switch, it would be hard to argue that this was not a great move by Lord Abbett. They were able to keep the drawdown during the financial crisis to a manageable 1.09% for 2008. However, since that time the performance of the fund has been fantastic and investors have piled in. When they made the switch in 2007 the fund had $116 million under management. Today they have over $16 Billion.
Short-Term Performance: Excellent. The Lord Abbett Short Duration Income Fund is up over 6% in the last year, smashing the return of the average short term bond fund by over 3%. The performance over the last 3 years is also highly impressive. The fund is up 5.38% per year on average, which beats the average short term bond fund by over 2% a year.
Long-Term Performance: Excellent/Special As discussed the fund had a major change in strategy in 2007, so the 10 year returns need an asterisk beside them. With that being said the fund has outperformed the average short term bond fund over both the last 5 and 10 year periods. Its 6.35% average yearly performance over the last 5 years is especially stellar, besting the average short term bond fund by over 3% a year.
Returns Relative to Risk: Excellent The Lord Abbett Short Duration Income Fund invests in much riskier credits than its government and investment grade only counterparts. However it also provides a significantly higher yield and total return in order to compensate for that extra risk. The fund’s duration of 1.9 is around the average for short term bond funds.
Fees: Good. The Fund charges a .49% annual expense ratio which is on the low end for this type of fund. Make sure you specifically get the LDLFX share class of this fund which comes with no load fees. Its available from Fidelity for a $2500 minimum. You can read more about mutual fund fees here.
Manager Tenure: Excellent The fund’s co-manager’s Robert Lee and Andy O’Brien have both been with the fund since 1998.