At 36% of assets, the fund's position in corporate bonds has remained relatively stable over the last few months. Matthews has focused recent purchases on automakers Ford and General Motors. He likes their new product lines and improving balance sheets, as well as their bonds' nearly 300 basis point yield advantage over Treasury notes. The portfolio has a duration of about 4.5 years, which may shorten somewhat if interest rates go higher.
Whatever adjustments to the portfolio Matthews makes in the future, investors can expect relatively few surprises from this fund. "What you see is what you get," he says. "A lot of funds use cleverly structured financial products to juice up yield. We stick with investment-grade bonds." Matthews typically avoids making sizable bets on individual issues or the direction of interest rates.
Morningstar analyst Brian Sweeney characterizes the Payden Core Bond Fund as "a conservative anchor of an investor's portfolio." He points out that while a preference for higher-quality bonds aided the fund during the corporate bond meltdown of 2002, its returns lagged last year as investors gravitated to lower-quality bonds. An emphasis on interest-sensitive high-quality issues makes it somewhat more volatile than its peers, he adds. Still, he notes that the fund is "a fantastic option for conservative retail investors-made even more so by Payden's recent decision to drop the fund's expense ratio to .44%, which represents a tremendous deal for a fund of this quality." The average intermediate-term bond fund's expense ratio is nearly one percentage point higher.