BCPL delivers actively managed exposure to investment-grade bonds while opportunistically reaching for extra yield through high-yield and non-US debt. It's designed for investors who want more income than core bond funds offer but without going full high-yield.
How It Works
The fund maintains a core of investment-grade corporate and government bonds while allocating up to 20% to below-investment-grade securities and 30% to foreign bonds (including emerging markets). Duration management is active, typically staying within 2 years of the Bloomberg Aggregate. The managers use sector rotation and credit selection to generate alpha beyond the index.
Key Features
- Plus sector allocation allows tactical high-yield and foreign bond exposure when spreads are attractive
- Active duration management provides flexibility to navigate rate cycles unlike passive core funds
- Significantly cheaper than most active bond mutual funds while offering similar flexibility
Risks
- Credit migration risk — up to 20% junk bond exposure could face 30-40% losses in a recession
- Currency exposure on foreign holdings can add 5-10% volatility vs pure USD portfolios
- Active management risk — wrong duration or credit calls could underperform passive alternatives by 2-3% annually
Who Should Own This
Best for income-focused investors who find core bond yields insufficient but aren't ready for dedicated high-yield funds. Works well as a bond sleeve upgrade for moderate risk portfolios, particularly for those with 5+ year horizons who can weather the occasional credit hiccup. Not suitable for liability matching or as a pure equity hedge.