Is DLTNX a Strong Bond Fund Right Now?
Having trouble finding a Government Mortgage - Intermediate fund? DoubleLine Total Return Bond N (DLTNX) is a possible starting point. DLTNX bears a Zacks Mutual Fund Rank of 3 (Hold), which is based on various forecasting factors like size, cost, and past performance.
Objective
We classify DLTNX in the Government Mortgage - Intermediate category, an area full of potential choices. Government Mortgage - Intermediate funds focus on the mortgage-backed securities (MBS) market, which packages mortgages together and then sells off the pooled securities as a MBS. Honing in on MBS' that have at least three years to maturity but less than 10, this fund category presents a medium risk and yield profile.
History of Fund/Manager
Double Line is based in Los Angeles, CA, and is the manager of DLTNX. The DoubleLine Total Return Bond N made its debut in April of 2010 and DLTNX has managed to accumulate roughly $3.90 billion in assets, as of the most recently available information. A team of investment professionals is the fund's current manager.
Performance
Of course, investors look for strong performance in funds. DLTNX has a 5-year annualized total return of 0.81%, and it sits in the middle 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 5.41%, 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. DLTNX's standard deviation over the past three years is 5.66% compared to the category average of 8.9%. The fund's standard deviation over the past 5 years is 5.83% compared to the category average of 10.38%. 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 those that believe interest rates will rise, this is an important factor to consider. DLTNX has a modified duration of 5.52, which suggests that the fund will decline 5.52% for every hundred-basis-point increase in interest rates.
Income
Since income is, of course, a big reason for purchasing a fixed income security, it is always important to consider the fund's average coupon. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 3.76% means that a $10,000 investment should result in a yearly payout of $376.
While a higher coupon is good for when you want a strong level of current income, it could present a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond. Investors also need to consider risk relative to broad benchmarks, as income is only one part of the bond picture.
With a beta of 0.99, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, DLTNX has a positive alpha of 0.11 , 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, DLTNX has 73.6% in high quality bonds rated at least "AA" or higher. The fund has an average quality of AA, and focuses on high 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, DLTNX is a no load fund. It has an expense ratio of 0.74% compared to the category average of 0.85%. Looking at the fund from a cost perspective, DLTNX is actually cheaper than its peers.
Investors need to be aware that with this product, the minimum initial investment is $2,000; each subsequent investment needs to be at least $100.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
Overall, DoubleLine Total Return Bond N ( DLTNX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a somewhat average choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the Government Mortgage - Intermediate, make sure to go to www.zacks.com/funds/mutual-funds 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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