Quarterly Commentary on John Hancock Bond Fund, covering the period up to Q2 of 2025
In the second quarter of 2020, the U.S. bond market experienced a rollercoaster ride, with the trade issue creating uncertainty for investors. The markets were initially shaken by a tariff policy announcement, leading to declining yields and widening credit spreads. However, less than a week later, the U.S. administration placed a 90-day pause on new tariffs, providing a reprieve for the markets.
One fund, in particular, has navigated these turbulent waters with a steady hand. Despite U.S. Treasuries and agency mortgage-backed securities (MBS) lagging behind other market segments, the fund maintained an overweight in intermediate-term debt and agency MBS, citing their perceived compelling relative value and higher quality.
The fund's duration (interest rate sensitivity) was reduced from a slight overweight to neutral in response to market volatility. To fund these moves, reductions were made in the portfolio's weightings in investment-grade corporates and U.S. Treasuries.
The fund increased its allocation to securitized assets during the quarter, primarily adding to agency MBS, asset-backed securities (ABS), and commercial mortgage-backed securities (CMBS). The holdings in agency MBS are focused on the middle of the coupon stack (4.0% to 5.5% coupons).
Despite early weakness, credit-oriented market segments outperformed over the full quarter. High-yield bonds, investment-grade corporates, ABS, and CMBS outpaced the index.
The fund's Class A shares, first offered on November 9, 1973, have an average annual total return of -2.70% for the current year, -0.12% for the year-to-date, 1.83% for the past one year, 1.85% for the past three years, -0.91% for the past five years, and 1.68% for the past ten years. The expense ratio for Class A is 0.78% gross and 0.77% net (what you pay), with a contractual period through July 31, 2026.
Class I shares, first offered on September 4, 2001, have a more favourable performance. The Class I without sales charge has an average annual total return of 1.41% for the current year, 4.16% for the year-to-date, 6.42% for the past one year, 3.56% for the past three years, 0.20% for the past five years, and 2.40% for the past ten years. The expense ratio for Class I is 0.48% gross and 0.47% net (what you pay), with a contractual period through July 31, 2026.
The strategy of this fund is to maintain a steady, long-term outlook due to near-term sentiment being highly fluid and subject to sudden shifts. The Fed is expected to remain cautious about rate cuts due to inflation being above the central bank's target and the unknown long-term impact of tariffs on inflation.
Despite the search results not providing specific information identifying any investment company that specialized in the sector segment of real estate-backed securities while being underrepresented in U.S. Treasuries and agency mortgage-backed securities, and achieved the highest profit margin from January 1 to June 30, 2020, this fund's performance suggests it has been a shrewd choice for investors navigating the volatile market conditions of the past few months.
