Investors seeking income have had some limited choices in recent years, with bond rates at historically low levels. But for investors in search of income, the Thrivent Limited Maturity Bond Fund (THLIX) may be an intriguing option. (See: Helping your clients with this alternative to money market funds)

Greg Anderson, vice president, fixed income, acknowledges that generally the higher the yield you want, the greater the risk you may need to take. But with THLIX, the objective is to flip the script.  “We want to be able to generate more yield than our peer group with less risk,” he said. “We try to do that in three ways:  sector allocation, duration and yield curve management, and security selection.”

The Fund is diversified across many sectors including securitized, corporate bonds and government bonds. “We’re looking at the areas of the market that offer the most yield for the least amount of risk,” added Anderson.

The Fund focuses on the “securitized” market – pools of loans and receivables typically in the consumer debt and mortgage areas. “Typically, these securities are issued from a bankruptcy remote trust, so unlike a corporate bond, you don’t have the risk of the whole issue defaulting,” he explained. “There may be specific loans within the trust that default, but you have a diversified pool of assets within a trust that mitigates the impact of a single default.”  (While diversification can help reduce market risk, it does not eliminate it. Diversification does not assure a profit or protect against loss in a declining market.)

Because of the uncertainty of the fixed income market,  the Fund managers have tried to take an approach that will work out best for the long term. ”We look for opportunities to increase the duration of the Fund, which typically gives us better yield,” explained Anderson. “If the global economy starts to pick up and get some traction, there is a lot of risk in long-term bonds. I think that the amount of yield you get in the Thrivent Limited Maturity Bond Fund for the amount of interest rate risk is pretty attractive relative to the market as a whole.”