Praxis reaffirms Morningstar's recent changes to intermediate bond category

Praxis update | May 06, 2019

Morningstar splits its intermediate-term bond category into two categories

Praxis Mutual Funds^®, a leading faith-based, socially responsible family of mutual funds from Everence^® Financial, affirms and supports a recent decision by Morningstar to split its intermediate-term bond category into two categories: Intermediate Core and Intermediate Core Plus. The change went into effect on April 30. Prior to the change, Morningstar’s intermediate-term bond category was its largest fixed income category.

Investment managers of the Praxis Impact Bond Fund, which is categorized in the Intermediate Core category, have long sought this change to help investors better understand the wide range of funds within Morningstar’s vast intermediate-term bond category.

“We welcome this change and view it as a positive move for investors and intermediate bond fund managers alike,” said Benjamin Bailey, CFA^®, vice president of investments and senior fixed income investment manager for Praxis Mutual Funds. “We view the new Intermediate Core category as a more representative group of peers, given our focus on quality - typically investment grade - securities. We will no longer be compared with core-plus funds which can invest in a wider range of securities including much lower quality bonds.”

A hallmark of the Praxis Impact Bond Fund is its current 30% weight in carefully selected, market-rate fixed-income investments that support climate and community investment projects around the world within a core, well-diversified bond portfolio.

On May 3, Morningstar upgraded the Praxis Impact Bond Fund institutional share class to a four-star rating overall with 386 funds in the class. The Fund celebrates its 25-year anniversary this year.

Impact Bond Fund

At Praxis, our investments generate a competitive financial return and deliver a clear and direct benefit to people and our planet.

Disclosure

Bond funds will tend to experience smaller fluctuations in value than stock funds. However, investors in any bond fund should anticipate fluctuations in price, especially for longer-term issues and in environments of rising interest rates.

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The Morningstar Rating™ for funds, or “star rating”, is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating™ for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating™ metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods. The Praxis Impact Bond Fund received 4 stars among 330 for the three-year, 4 stars among 289 for the five-year, and 3 stars among 214 Intermediate Core Bond Funds for the ten-year period ending April 30, 2019.