Is EAFAX a Strong Bond Fund Right Now?

Having trouble finding a High Yield - Bonds fund? Well, Eaton Vance Floating-Rate Advantage A (EAFAX) would not be a good potential starting point right now. EAFAX carries a Zacks Mutual Fund Rank of 4 (Sell), which is based on various forecasting factors like size, cost, and past performance.

Objective

EAFAX is classified in the High Yield - Bonds segment by Zacks, an area full of investment possibilities. High Yield - Bonds funds come in below investment grade, and are referred to as "junk" bonds for this reason. Compared to their investment grade peers, these funds are at a higher default risk, but typically pay out higher yields while posing similar interest rate risks.

History of Fund/Manager

Eaton Vance is based in Boston, MA, and is the manager of EAFAX. The Eaton Vance Floating-Rate Advantage A made its debut in April of 2008 and EAFAX has managed to accumulate roughly $1.02 billion in assets, as of the most recently available information. Ralph H. Hinckley Jr is the fund's current manager and has held that role since June of 2021.

Performance

Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 6.38%, and it sits 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 9.5%, 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 9.97%, the standard deviation of EAFAX over the past three years is 2.89%. Looking at the past 5 years, the fund's standard deviation is 4.14% compared to the category average of 11.24%. 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. EAFAX has a modified duration of .34, which suggests that the fund will decline 0.34% 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, EAFAX is a load fund. It has an expense ratio of 0.96% compared to the category average of 0.97%. Looking at the fund from a cost perspective, EAFAX 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 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, even with its comparatively strong performance, better downside risk, and lower fees, Eaton Vance Floating-Rate Advantage A ( EAFAX ) has a low Zacks Mutual Fund rank, and therefore looks a somewhat weak choice for investors right now.

Your research on the High Yield - Bonds segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer 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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