Summary: The MassMutual Premier Short-Duration Bond Fund is a great fund for investors looking for a place to park short term cash and are willing to take a small amount of credit risk.
Commentary: If you are not willing to take some credit and/or interest rate risk, then you should probably avoid the short duration bond fund category and opt for a CD or high yield savings account instead. This is why we like the MassMutual Premier Short-Duration Bond Fund. The fund is currently yielding around 1.71%, which compares very favorably to most short duration funds with higher credit ratings, which are currently yielding less than .50%. The fund’s annual expense ratio is also relatively low at .55%, so you are still getting over 1% after fees.
The average credit rating of the fund is A, which is still high investment grade, but lower than AAA rated short duration government bond funds for example. Because the fund holds short-term bonds, an average credit rating of A is less of a concern. There would have to be something really unexpected, like an accounting scandal or total freezing of the credit markets, to cause a default on a short-term bond with an A Rating. Or put another way, problems in the overall economy should not lead to any defaults of the bonds it holds.
We also like the fact that it is getting its extra yield from taking a bit of additional credit risk, and not from taking additional interest rate risk. The current duration of the fund is 1.4 years.
Short-Term Performance: Good. The MassMutual Premier Short-Duration Bond Fund S underperformed the average short term bond fund over the last year by .47%. However its performance over the last 3 years has been great, outperforming the average short term bond fund by .61% per year on average.
Long-Term Performance: Excellent The fund has outperformed the average short term bond fund over the last 5 and 10 year periods. Over the last 5 years, it has outperformed by 1.38% and over the last 10 by 1.09% per year on average.
Returns Relative to Risk: Good. The MassMutual Premier Short-Duration Bond Fund S invests in riskier credits than its government bond only counterparts. However it also provides a significantly higher yield in order to compensate for that extra risk. The fund’s duration of 1.4 is also low even for the short duration fund category, so it is taking very little interest rate risk.
Fees: Good. The Fund charges a .55% annual expense ratio. There is no load fees charged for this fund. You can learn more about bond mutual fund fees here.
Manager Tenure: Excellent. The fund has 5 portfolio managers 3 of which have been with the fund since inception.