Diversified bond mutual funds provide excellent opportunities to investors looking for steady returns with a relatively low level of risk. These funds provide exposure to a wide range of market sectors, thus reducing sector-specific risks.

A relatively higher level of liquidity also makes diversified bond funds more attractive. Meanwhile, investing in diversified bond funds is preferred to individual bonds’ investing as building a portfolio of the second type may prove more expensive than the former.

Below we share with you three best-ranked diversified bond mutual funds. Each has earned a Zacks Mutual Fund Rank #1 (Strong Buy) and is expected to outperform its peers in the future. Investors can click here to see the complete list of diversified bond funds, their Zacks Rank and past performance

RidgeWorth Total Return Bond A (CBPSX - MF report) invests the majority of its assets in fixed-income derivatives including debt securities issued by the government and its affiliates, corporate bonds and asset-backed securities. CBPSX invests in debt securities throughout the globe including those from emerging economies. The fund may invest a maximum of 20% of its assets in high-yield securities that are rated below investment-grade. RidgeWorth Total Return Bond A returned 6.3% in the last one-year period.

As of May 2016, CBPSX held 244 issues, with 9.32% of its total assets invested in U.S. Treasury Note 1.625%.

Baird Core Plus Bond Investor (BCOSX - MF report) is expected to provide a higher annual rate of total return than the Barclays U.S. Universal Bond Index. BCOSX invests a large chunk of its assets in debt securities including bonds that are denominated in the U.S. dollar, securities issued by the U.S. government or its affiliates, asset and mortgage backed securities, and corporate bonds issued by both domestic and foreign corporate bodies. Though BCOSX mainly focuses on acquiring investment-grade debt securities, it may also invest not more than 20% of its assets in securities that are rated below investment grade and known as “junk” bonds. Baird Core Plus Bond Investor returned 6.3% in the last one-year period.

BCOSX has an expense ratio of 0.55% compared to the category average of 0.81%.

T. Rowe Price Global Multi-Sector Bond Advisor (PRSAX - MF report) invests the majority of its assets in bonds. PRSAX may invest a maximum half of its assets in non-U.S. dollar-denominated foreign debt securities. The fund may also invest up to 65% of its assets in securities and other holdings that are rated non investment-grade. PRSAX seeks high income along with capital appreciation. T. Rowe Price Global Multi-Sector Bond Advisor returned 5.1% in the last one-year period.

Steven Huber is the fund manager of PRSAX since 2008.

To view the Zacks Rank and past performance of all diversified bond mutual funds, investors can click here to see the complete list of funds.