Bonds can offer investors the convenience of a steady income stream with the stability of capital preservation. The Eagle fund's portfolio managers strive to deliver stable monthly income by focusing on individual securities that we believe offer returns similar to longer-duration bonds with considerably less risk.
- At least 80 percent of the fund's portfolio will be investment grade credits (rated BBB- or higher1). Targeted securities include U.S. Treasury and government agency bonds, corporate bonds, mortgage-backed and asset-backed securities.
- The average portfolio duration of the fund is expected to range from two to seven years based upon economic and market conditions.2
- The portfolio may include a limited percentage of foreign bonds; generally, these will be U.S. dollar denominated index-eligible issues.
Investing in bonds involves risks that may adversely affect the value of your investment such as inflation risk, credit risk, call risk, interest rate risk and liquidity risk, among others.
There are risks associated with fixed income investing, even though many investors consider bonds to be “risk free” investment vehicles. Historically, bonds have indeed provided less volatility and less risk of loss of capital than has equity investing. However, there are many factors which may affect the risk and return profile of a fixed income portfolio. The two most prominent factors are interest rate movements and the credit worthiness of the bond issuer. Bonds issued by the U.S. government have significantly less risk of default than those issued by corporations and municipalities. However, the overall return on government bonds tends to be less than these other types of fixed income securities. Investors should pay careful attention to the types of fixed income securities which comprise their portfolios and remember that, as with all investments, there is the risk of loss of capital.
A Real Estate Mortgage Investment Conduit (REMIC) is a type of multiclass mortgage-related security in which
interest and principal payments from mortgages are structured into separately traded securities. These classes are distinguished by their sensitivity to the prepayment risk of the underlying mortgage-related collateral. Therefore, they may be more or less sensitive to prepayment risk, bear different interest rates, and have various average lives and final maturities.
(1) Credit quality. Credit quality is a measure of creditworthiness of the issuing organization that reflects the likelihood that it will be able to pay its debt (credit risk). Investment grade refers to securities rated [BBB-] or better by Standard & Poor’s Rating Services or an equivalent rating by at least one other nationally recognized statistical rating organization or, for unrated securities, those that are determined to be of equivalent quality by the fund’s portfolio managers.
(2) Duration. Duration is the most commonly used measure of risk in bond investing. Duration incorporates a bond’s yield, coupon, final maturity and call features into one number, expressed in years, that indicates how price-sensitive a bond or portfolio is to changes in interest rates. Bonds with higher durations carry more risk and have higher price volatility than bonds with lower durations.