Is AGDCX a Strong Bond Fund Right Now?
If you have been looking for High Yield - Bonds funds, a place to start could be AB High Income Fund C (AGDCX). AGDCX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.
Objective
AGDCX is part of the High Yield - Bonds section, which is a segment that boasts many possible options. Often referred to as "junk" bonds,High Yield - Bonds funds sit below investment grade, meaning they are at a high default risk compared to their investment grade peers. However, one advantage to junk bonds is that they generally pay out higher yields while posing similar interest rate risks to their investment grade counterparts.
History of Fund/Manager
AGDCX is a part of the AllianceBernstein family of funds, a company based out of New York, NY. AB High Income Fund C made its debut in February of 1994, and since then, AGDCX has accumulated about $108.95 million in assets, per the most up-to-date date available. A team of investment professionals is the fund's current manager.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. AGDCX has a 5-year annualized total return of 3.42%, and is in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 8.92%, which places it in the top third during this time-frame.
It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.
When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Over the past three years, AGDCX's standard deviation comes in at 4.35%, compared to the category average of 9.52%. The fund's standard deviation over the past 5 years is 6.7% compared to the category average of 11.37%. This makes the fund less volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a specific bond's interest rate sensitivity, and is an excellent way to judge how fixed income securities will respond to a shifting rate environment.
For investors who think interest rates will rise, this is an important factor to consider. AGDCX has a modified duration of 2.84, which suggests that the fund will decline 2.84% for every hundred-basis-point increase in interest rates.
Income
Income is often a big reason for purchasing a fixed income security, so it is important to consider the fund's average coupon. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 6.68% means that a $10,000 investment should result in a yearly payout of $668.
If you are looking for a strong level of current income, a higher coupon is a good choice, though it could pose a reinvestment risk; these risks can occur if rates are lower in the future when compared to the initial purchase date of the bond. Because income is only one part of the bond picture, investors should also consider risk relative to broad benchmarks.
This fund has a beta of 0.45, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, AGDCX has a positive alpha of 2.37, which measures performance on a risk-adjusted basis.Ratings
Investors should also consider a bond's rating, which is a grade "AAA" to "D" given to a bond that indicates its credit quality. With this letter scale in mind, AGDCX's junk bond component-bonds rated "BB" or below-is at 76.66%. This means that the fund has an average quality of BBB, and focuses on medium quality securities.Expenses
As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, AGDCX is a no load fund. It has an expense ratio of 1.61% compared to the category average of 0.92%. So, AGDCX is actually more expensive than its peers from a cost perspective.
Investors need to be aware that with this product, the minimum initial investment is $2,500; each subsequent investment needs to be at least $50.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
Overall, AB High Income Fund C ( AGDCX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and higher fees, this fund looks like a good potential choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the High Yield - Bonds, make sure to go to www.zacks.com/funds/mutual-funds for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.
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This article originally published on Zacks Investment Research (zacks.com).
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