In this article we will examine the top 10 largest Bond Mutual funds. ranked from biggest to smallest.  Many of the funds on this list are considered “core bond funds” which means they are designed to be the centerpiece of the bond allocation in a portfolio and to give broad exposure to the investment grade universe of bonds.

1. The PIMCO Total Return Fund Assets Under Management $246 Billion

What is the fund’s objective?  To maximize total return, consistent with the preservation of capital and prudent investment management.  (The fund will look for income generating opportunities but in the context of maximizing the total return of the fund from both income and capital gains).

Is this an Active or Passive Fund? This is an actively managed fund whose superstar manager Bill Gross has little constraints on how he invests.

What type of bond’s does it hold? This is an intermediate term bond fund, which invests in corporate, government and foreign bonds with average maturities of between 4 and 10 years.  The types of bonds it holds is going to vary and shift based on where the fund manager sees the most opportunity to maximize total return.

Who is this fund appropriate for? Investors looking for a “core” bond fund to diversify their portfolio and are willing to take more risk than an index fund for potentially higher returns in the form of both capital appreciation and income.

2. Vanguard Total Bond Market Index Fund: Assets Under Management $110 Billion

What is the Fund’s Objective?   To track the performance of the Barclays Capital U.S. Aggregate Float Adjusted Index, which is designed to represent the performance of the US Investment Grade Bond Market, minus securities held directly by the Federal Reserve .

Is this an Active of Passive Fund?  This is a passive fund.

What Type of Bonds Does it Hold? This is an intermediate term bond fund, which invests in US Investment Grade bonds representative of the broader investment grade bond market.  Currently treasuries and mortgage backed securities make up 65% of the portfolio because these markets have seen an explosion in growth after the financial crisis.  However even without this explosion in growth they would still be a very large part of the market and make up more than 50% of the index.

Who is the Fund Appropriate For?  Those looking for a core bond portfolio with very low fees, that will have performance that matches the overall US bond market.

3. Templeton Global Bond Fund: Assets Under Management $57 Billion

What’s the Fund’s Objective? To maximise total investment return consisting of a combination of interest income, capital appreciation and currency gains.  Investments can include fixed rate and floating rate debt of government and quasi governmental entities.  The fund has less than 10% of its holdings in bonds issued by US issuers (government and corporate).

Is this an Active or Passive Fund? This is an actively managed fund whose managers are making decisions not only on the type of bonds to invest in but also which country’s bonds to hold.

What type of bonds does it hold?  Currently the fund is most heavily weighted towards South Korean Government Bonds with 17% of the portfolio devoted to the country.  Over 70% of the portfolio is currently concentrated in bonds with a duration of less than 2 years because the managers are concerned about the potential for higher interest rates.

Who is this fund appropriate for?  Investors looking for the added diversification of a global bond fund, primarily focused on total return.

4. Vanguard Total Bond Market Index Fund II: Assets Under Management $56 Billion

This is the same as the Vanguard Total Bond Market Index Fund listed above, however it is only used in Vanguard Funds of Funds or similar investments.  In other words if you want to invest in the Fund directly you need to do so via the Vanguard Total Bond Market Index Fund above.

5. Vanguard Inflation-Protected Securities Assets Under Management $43 Billion

What’s the Fund’s Objective?  To provide investors inflation protection and income consistent with investment in inflation-indexed securities.

Is this an Active or Passive Fund? This is an actively managed fund, however with tight constraints on what it can invest in.

What type of Bond’s does it hold? The fund invests at least 80% of its assets in inflation-indexed bonds issued by the U.S. government, its agencies and instrumentalities, and corporations. The fund may invest in bonds of any maturity; however, its dollar-weighted average maturity is expected to be in a range of 7 to 20 years. While investors normally choose this fund as an option for inflation protection, with yields at historic lows they could see losses in the value of the fund shares even if inflation picks up and interest rates rise.

Who is this fund appropriate for?  Investors looking for inflation protection and are willing to weather some short term volatility in fund returns in order to get it.

6. Vanguard Short Term Bond Fund Assets Under Management $39 Billion

What is the fund’s Objective? To track the performance of the Barclays Capital U.S. 1–5 Year Government/Credit Float Adjusted Index.

Is this an active or passive fund? Passive

What type of Bonds does it Hold? Around 2/3rds of the fund is invested in corporate bonds with the other 1/3rd invested in US Treasury and Agency Bonds.  Because a large amount of the portfolio is invested in corporate bonds its performance can suffer when investment mood sours and investors shift money into safe haven investments such as US Treasuries.  The duration of the fund is shorter than its benchmark which reduces its sensitivity to moves in interest rates.

Who is this fund appropriate for?  Those who are willing to give up some income and capital appreciation potential for less risk and a more consistent income stream.

7. Vanguard GNMA Fund Assets Under Management $39 Billion

What is the Fund’s Objective? To provide a moderate level of current income.

Is this an active or a passive fund? This is an actively managed funds but with tight constraints on what it can invest in.

What type of bonds does it invest in? Primarily in mortgage bonds backed by Ginnie Mae (GNMA).  Ginnie Mae is a government agency that is backed by the full faith and credit of the US Government, making these bonds as safe as treasuries from a default risk standpoint.  The average maturity of the bonds held by the fund will normally fall within an intermediate-term range (3 to 10 years).

Who is the fund appropriate for? Investors willing to accept some fluctuation in the share price of the fund in exchange for higher income levels.

8. Vanguard Intermediate-Term Tax-Exempt Fund Assets Under Management $35 Billion

What is the fund’s objective? To provide a moderate and sustainable level of current income that is exempt from federal personal income taxes.

Is this an active or a passive fund? This is an active fund but with tight constraints on what it can invest in.

What type of bonds does it invest in? High quality municipal bonds with an average weighted maturity of 6 to 12 years.

Who is the fund appropriate for? Investors in high tax brackets who live in states with low or no state income taxes and are looking for income that is free from federal taxes.

9. American Funds Bond Fund of America Assets Under Management $34 Billion

What is the fund’s objective? To provide as high a level of current income as is consistent with the preservation of capital.

What type of bonds does it invest in?   US Corporate, government and mortgage bonds with up to 25% of the fund in foreign government and corporate bonds.  The average weighted maturity of the bonds are in the intermediate (3 to 10 years) to long term (over 10 years) range.

Is this an active or passive fund? This is an active fund which has a little constraints on that types of bonds it can invest in.

Who is this fund appropriate for? Investors looking for a core bond fund holding with more income and less volatility than other core funds mentioned.

10. DoubleLine Total Return Assets Under Management $27 Billion

What is the fund’s objective? To maximize total return.

What type of bonds does it invest in? Agency and non‐agency mortgage‐backed securities of any maturity which are primarily investment grade. Mortgage backed securities are pools of mortgages.  Agency mortgage backed securities have either an explicit or implicit guarantee from the US Government and non agency mortgage backed securities do not.

Is this an active or passive fund? This is an active fund with little constraints placed on the fund manager, Jeffrey Gundlach.

Who is this fund appropriate for?  Those looking for a core bond fund with the potential for a high level of income and are willing to accept more risk than typically associated with a core bond fund.