Is BHYIX a Strong Bond Fund Right Now?

If investors are looking at the High Yield - Bonds fund category, BlackRock High Yield Bond Institutional (BHYIX) could be a potential option. BHYIX has a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

BHYIX 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

BlackRock is responsible for BHYIX, and the company is based out of New York, NY. BlackRock High Yield Bond Institutional made its debut in November of 1998, and since then, BHYIX has accumulated about $13.56 billion in assets, per the most up-to-date date available. Mitchell Garfin is the fund's current manager and has held that role since December of 2009.

Performance

Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 4.57%, 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 9.12%, 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. Compared to the category average of 9.75%, the standard deviation of BHYIX over the past three years is 4.21%. The fund's standard deviation over the past 5 years is 6.71% compared to the category average of 11.59%. 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. BHYIX has a modified duration of 2.82, which suggests that the fund will decline 2.82% for every hundred-basis-point increase in interest rates.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, BHYIX is a no load fund. It has an expense ratio of 0.58% compared to the category average of 0.92%. So, BHYIX is actually cheaper than its peers from a cost perspective.

Investors need to be aware that with this product, the minimum initial investment is $2.00 million; each subsequent investment has no minimum amount.

Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.

Bottom Line

Overall, BlackRock High Yield Bond Institutional ( BHYIX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, BlackRock High Yield Bond Institutional ( BHYIX ) looks like a good potential choice for investors right now.

Don't stop here for your research on High Yield - Bonds funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare BHYIX to its peers as well for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.

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This article originally published on Zacks Investment Research (zacks.com).

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