Although the No. 1 spot was held by a commodities fund, high yield and convertibles dominated the 10 best-performing bond portfolios for the year ended Sept. 30, according to the manager performance database of Morningstar Inc., Chicago.
The best overall one-year performer among separate accounts was the Total Commodity Return portfolio run by Credit Suisse Asset Management LLC, New York, with 28.2%. In second place was the Growth and Income fund run by Calamos Advisors LLC, Naperville, Ill., which returned 17.4%, followed by the High Income portfolio run by SMH Capital Advisors Inc., Fort Worth, Texas, which gained 17.1%. Rounding out the top five were U.S. High Yield Bond portfolio run by DDJ Capital Management LLC, Boston, with 15.5%, and the Core Opportunistic High Yield strategy run by PENN Capital Management Co., Inc., Cherry Hill, N.J., which returned 14.7%.
That compares with a 2.9% gain for the Citigroup Broad Investment Grade Bond index, 6.7% for the Lehman Brothers High Yield Bond index and 7.23% for the Merrill Lynch All U.S. Convertible Securities index.
The median fund in the Morningstar managed account fixed-income universe returned 2.9% for the year ended Sept. 30.
Nelson Louie, portfolio manager of CSAM's total commodity return portfolio, a commodity index strategy benchmarked to the Goldman Sachs Commodity index with underlying assets in conservative enhanced cash investments, credited the energy and industrial metals sectors for CSAM's strong gains.
Recent events such as Hurricane Katrina contributed to rising energy prices as supply concerns took hold, Mr. Louie said. "(It was the) same with industrial metals. You also have the condition of tight supply and strong demand from items such as copper."
The Calamos Growth & Income fund maintained a diversified portfolio of equity, convertible and fixed-income securities
"From a macro perspective … the economy is in good shape, and you need to have some fixed-income exposure that has an equity tie," said Nick Calamos, senior executive vice president and chief investment officer.
Over the past nine months, Calamos shifted the portfolio to include more stable growth companies, reducing cyclical exposure. The best performers were companies such Genworth Financial Inc., Amgen Inc., Teva Pharmaceuticals Industries Ltd. and Whole Foods Market Inc., he said.