Mutual Fund Review: Dupree Intermediate Government Bond (DPIGX)

With the recent market volatility there has been more people becoming interested in bonds and bond funds. Well, I have some bad news for you. If you wait until the market already makes its move down and then decide to get into bonds, you’re too late. Nevertheless, this market activity reinforces the importance of having an adequately diversified portfolio for your specific goals and risk tolerance. Today I want to take a look at some of the most boring type of bonds; government bonds.

The Dupree Intermediate Government Bond Fund (DPIGX) is probably a fund you’ve never heard of. It is nothing to be alarmed about, it is simply a small fund company and this particular fund only has $23 million in assets. Actually, being small can be a great benefit to a fund as it allows the managers to move holdings around without much of a concern. When you have a fund with billions of dollars it is more difficult to make changes, which can hold a fund back in fast moving markets.

Key Stats

  • Manager: Vincent Harrison & Thomas Dupree Sr.
  • Min. Initial Investment: $100
  • Front-Load: None
  • 12(b)-1 Fee: None
  • Expense Ratio: 0.45%
  • Assets: $23 million
  • Average Market Cap: N/A
  • Turnover: 18%
  • Yield: 5.08%

Performance

DPIGXWith a government bond fund we’re not so much concerned with the actual return as we are with the return relative to the benchmark and its peers. As you can see here, this fund has significantly outperformed its peers in the intermediate government bond category. Over 1% YTD and a 5-year average performance of over 1%. This may not seem like much, but when you’re talking about funds that typically only see total annual returns of between 2-6%, this is a significant factor.

Even when matching it up against the Lehman Brothers Aggregate Bond Index, which includes corporate and foreign bonds, this fund keeps pace with it, or actually outperforms slightly. So, you are getting the AAA quality and safety of government bonds and keeping up or beating the broad-based index. Maximizing returns while minimizing risk is always a good thing.

Pros

  • No front load
  • Low expenses
  • Extremely low initial minimum purchase ($100)
  • Excellent returns in its category
  • Very low turnover rate of 18% (average for category is 227%)

Cons

  • Limited outside brokerage availability
  • Fund is drifting slightly toward more long-term holdings

The Bottom Line

Let’s face it, for those of us who still have 20-30 years until retirement, there isn’t much to get excited about when it comes to bond funds. Even so, bonds can play an important role in creating a risk-adjusted portfolio, and this fund can be a good starting point. Granted, there are a lot of bond index funds or ETFs out there that can also do the job, but this fund has displayed solid performance with sound management and reduced risk.

Unfortunately, this fund is only available directly through Dupree or a select number of brokerage firms, so if your brokerage doesn’t offer Dupree funds, it may not be worth the trouble. On the other hand, given the very low minimum purchase, if you are with a broker that does offer this fund family, it makes a great entry level option for building a bond position in your portfolio.

Author: Jeremy Vohwinkle

My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.

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