Is BMSAX a Strong Bond Fund Right Now?
Investment Grade Bond - Intermediate fund seekers should not consider taking a look at BlackRock Income Fund Inv A (BMSAX) at this time. BMSAX carries a Zacks Mutual Fund Rank of 4 (Sell), which is based on various forecasting factors like size, cost, and past performance.
Objective
We classify BMSAX in the Investment Grade Bond - Intermediate category, an area rife with potential choices. Investment Grade Bond - Intermediate funds target the middle part of the curve, typically by investing in bonds that mature in more than three years but less than 15 years. At these maturity levels, fixed income instruments have medium duration risk--but they compensate investors with a respectable yield compared to shorter maturity options. Finally, a focus on investment grade ensures that these funds are safer, but yields will be lower than in the junk bond category.
History of Fund/Manager
BlackRock is responsible for BMSAX, and the company is based out of New York, NY. Since BlackRock Income Fund Inv A made its debut in March of 2010, BMSAX has garnered more than $184.19 million in assets. The fund is currently managed by a team of investment professionals.
Performance
Investors naturally seek funds with strong performance. BMSAX has a 5-year annualized total return of 2.99%, and is in the bottom third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 8.42%, which places it in the middle 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, BMSAX's standard deviation comes in at 4.28%, compared to the category average of 10.08%. Over the past 5 years, the standard deviation of the fund is 5.01% compared to the category average of 11.2%. This makes the fund less volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a given bond's interest rate sensitivity, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at.
For investors who think interest rates will rise, this is an important factor to consider. BMSAX has a modified duration of 2.75, which suggests that the fund will decline 2.75% for every hundred-basis-point increase in interest rates.
Income
It is important to consider the fund's average coupon because income is often a big reason for purchasing a fixed income security. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 5.06% means that a $10,000 investment should result in a yearly payout of $506.
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.
BMSAX carries a beta of 0.45, meaning that the fund is less volatile than a broad market index of fixed income securities. With this in mind, it has a positive alpha of 2.08, 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, BMSAX has 45.58 in high quality bonds rated at least "AA" or higher, while 31.8% are of medium quality, with ratings of "A" to "BBB". The fund's junk bond component-bonds rated "BB" or below-is at 28.11%, giving BMSAX an average quality of A. This means that it focuses on high quality securities.Expenses
For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, BMSAX is a load fund. It has an expense ratio of 0.87% compared to the category average of 0.95%. Looking at the fund from a cost perspective, BMSAX is actually cheaper than its peers.
Investors need to be aware that with this product, the minimum initial investment is $1,000; 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, even with its comparatively weak performance, better downside risk, and lower fees, BlackRock Income Fund Inv A ( BMSAX ) has a low Zacks Mutual Fund rank, and therefore looks a somewhat weak choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the Investment Grade Bond - Intermediate, make sure to go to www.zacks.com/funds/mutual-funds for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.
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This article originally published on Zacks Investment Research (zacks.com).
Source Zacks-com
