Morningstar recently refined several fixed-income categories to better highlight strategies that focus on securitized bonds. These updates aim to give investors clearer insight into how different bond funds take risk and where they find opportunities in the securitized market.
The government mortgage-backed bond Morningstar Category includes funds that invest primarily in US government debt and hold at least 65% of assets in agency mortgage-backed securities. The securitized bond—diversified category covers strategies that keep at least 65% in investment-grade securitized sectors, such as agency and nonagency mortgages, commercial MBS, collateralized mortgage obligations, and other asset-backed bonds. The securitized bond—focused category captures funds that invest at least 65% in investment-grade securitized debt but concentrate heavily in a single sector.
These distinctions help separate more-specialized strategies from traditional core bond funds. For investors, these strategies can serve as useful complements by offering diversification and, in many cases, enhanced income potential. Here are three highly rated options worth considering.
Vanguard GNMA VFIJX, which has a Morningstar Medalist Rating of Silver and resides in the government mortgage-backed bond category, benefits from a repeatable, effective process and confidence in its leadership. Subadvisor Wellington Management brings top-tier fixed-income resources, strengthened in recent years by deeper securitized and quantitative expertise. Lead manager Brian Conroy draws on extensive hands-on experience from his years as a securitized analyst and has established a solid record, making consistent, well-supported decisions by leveraging sophisticated mortgage models. He fosters strong communication with analysts and traders, enhancing idea generation and risk evaluation. The portfolio focuses on GNMA mortgage pass-throughs while tactically allocating 10% to 15% to non-GNMA holdings when relative value improves. The fund avoids riskier nonagency structures, instead emphasizing government-backed collateralized mortgage obligations and seasoned agency credit-risk transfers. It also benefits from a razor-thin expense ratio.
Pimco GNMA and Government Securities PAGNX, which is more flexible than its government mortgage-backed bond peers, benefits from a skilled leadership team and a disciplined, risk-conscious approach. Lead manager Dan Hyman, who has guided the strategy since 2013, works alongside longtime comanager Mike Cudzil and newer addition Munish Gupta as part of Pimco’s seven-person agency MBS group. The team applies a rigorous relative value framework, analyzing historical yield relationships across GNMA, Fannie Mae, and Freddie Mac securities and emphasizing specified-pool selection. The team’s value-driven orientation has produced a compelling long-term record. Since Hyman took over as lead manager in 2013, this Silver-rated strategy has beaten most peers in nearly every calendar year.
Bronze-rated TCW Securitized Bond’s TGLMX wider toolkit places it in the securitized bond—diversified category. It offers a distinctive, mortgage-focused approach that sets it apart from other agency MBS-focused managers. Managers Liza Crawford and Peter Van Gelderen oversee day-to-day implementation. Their deep mortgage expertise and ample resources support this specialized mandate. The fund was renamed in 2024 from TCW Total Return to emphasize its true focus: agency and nonagency mortgage-backed securities, with no corporate credit exposure. This unique profile has produced unconventional performance patterns, offering protection in credit-driven selloffs. Recent bumps aside, this strategy can provide investors with a unique approach and deliver high-quality income. In 2025, the fund’s 9% return was a percentage point better than its peer median. This remains a compelling option for investors seeking concentrated mortgage exposure or diversification away from corporate-heavy portfolios.
This article first appeared in the March 2026 issue of Morningstar FundInvestor. Download a complimentary copy of FundInvestor by visiting this website.