Western Asset Core Plus Bond Fund ?

[hogtied]

The only bond fund offered in my 401k is WACPX. Currently it makes up 45% of my 401k. The only other fixed income offering is a new stable value fund (less than 1 yr old) which yields a bit less.
WACPX currently yields 5.2%. Morningstar has just dropped WACPX's rating from 4 stars to 3. I am concerned due to the current economic climate in the bond theater. I am 57 and will retire in 2 years. Should I consider moving some money out of WACPX perhaps into the stable value fund or into a target retirement income fund? Thanks for your replies.

Here are WACPX's bond holding ratings along with it's benchmarks:
AAA 76.17 63.33
AA 2.60 6.64
A 4.22 10.00
BBB 8.35 12.66
BB 5.26 2.97
B 3.13 1.96
BELOW B 0.22 0.39
OTHER 0.05 2.06

Averages:
Maturity 7.50
Duration 4.80
Credit Quality AA

I will be rolling this 401k over to Vanguard at retirement. It makes up 80% of my total retirement savings.

 

[clifp]

Not sure if you have access to M* analysts reports.... So I'll shameless steal their stuff and subject you to a small plug. Their premium services is a worthwhile investment IMHO.

Morningstar's Take | 02-25-2008
by Paul Herbert, CFA It has been the worst of times for Western Asset Core Plus Bond, but we think there are reasons for optimism.
This world-beater took a serious body blow in 2007. The nearly 10-year-old fund gained just 2.6% last year, placing behind 90% of intermediate-term bond rivals and lagging more than half of the category for a calendar year for the first time. Its managers underestimated the degree to which fears of slowing economic growth would derail the corporate and mortgage-backed bond markets. Their positions in these sectors, including a double-digit-percentage-of-assets stake in high-yield bonds, were the primary culprits for the fund's underperformance.
Western Asset's managers seem most comfortable when their views differ from the bond market's, and they continue this approach these days. Prices for many bonds in their favorite areas, as well as those for particular bonds they own, seem to be reflecting recession-type scenarios. While the bosses grant that the housing market will continue to be weak for a number of years, they think the Federal Reserve's monetary response will blunt its impact on the economy and markets. So, they are sticking with the financial-services, automaker, and auto-finance bonds in the portfolio, as well as agency-backed mortgage bonds. Recently, the fund has struggled mightily for standing apart from the consensus, dropping 2.4% for the month through Feb. 22, 2008. When fixed-income investors' risk appetite returns, however, it stands to reason that the fund will experience a sharper snap-back than most.
Moreover, the fund will continue to rely on some key strengths to help it over the long term. For one, managers Ken Leech and Steve Walsh are among the most experienced stewards around, and a deep staff of credit analysts turns over rocks to help them find winning ideas. Low expenses give the fund a head start on pricier rivals, too.

See Previous Analyst Reports

The sidebar info is as follows

Kudos

Topnotch managers.

Advisor has deep pools of sector specialists and a large staff of risk analysts.

Great risk-adjusted returns.Risks

Fund's ability to invest in below-investment-grade bonds and foreign paper can invite credit risk and currency risk.

StrategyThis fund resembles sibling Western Asset Core Bond WATFX. Thus, management makes bolder duration adjustments (plus or minus 20% of its benchmark's duration) than many of the intermediate-term bond group's more conservative offerings. It also takes on added credit risk on occasion. Unlike that offering, the bosses can devote up to 20% of this fund's assets to non-U.S. bonds and as much as 15% of assets to below-investment-grade fare. Even with all of this latitude, the fund has delivered attractive risk-adjusted returns over time.

ManagementKen Leech, Western Asset's chief investment officer, and Steve Walsh, the firm's deputy investment chief, oversee the management team, which has a fine record. Each member of the team manages the fund's holdings in a different market sector. Compared with rivals in the fixed-income world, Western Asset has very large groups of credit analysts and risk analysts. The team won Morningstar's Fixed-Income Fund Manager of the Year Award in 2004.

Inside ScoopThis fund is a wider-reaching version of intermediate-term bond Analyst Pick Western Asset Core Bond. Not only does it feature many of the same qualities that led us to make that fund a top choice, but it's also been a very strong performer over time.

 

[hogtied]

thanks clifp, I knew this article was in M* premium files but was unable to attain it. I'm not signed up for premium archives and articles. It's much appreciated; as I need all info to make a decision on WACPX.

 

[clifp]

Judging from the very postive comments from M* and a two year time frame. I'd be inclined to sit tight, but advice from a stranger on the internet is worth what you pay for it...