Is FEMDX a Strong Bond Fund Right Now?

Any investors hoping to find a International Bond - Emerging fund could think about starting with Franklin Emerging Market Debt Opportunity Adviser (FEMDX). FEMDX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

FEMDX is part of the International Bond - Emerging section, a segment that boasts an impressive array of other possible selections. International Bond - Emerging funds offer a unique type of geographic diversification by focusing on fixed income securities from emerging nations around the globe. With these funds, investors can expect exposure to economies such as China, Brazil, India, South Africa, and Indonesia, just to name a few. While this can be appealing, these funds can also introduce currency risk.

History of Fund/Manager

FEMDX finds itself in the Franklin family, based out of San Mateo, CA. Franklin Emerging Market Debt Opportunity Adviser made its debut in October of 2006, and since then, FEMDX has accumulated about $150.46 million in assets, per the most up-to-date date available. The fund is currently managed by Nicholas Hardingham who has been in charge of the fund since June of 2014.

Performance

Investors naturally seek funds with strong performance. FEMDX has a 5-year annualized total return of 7.57%, and it sits in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 15.41%, 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 6.23%, the standard deviation of FEMDX over the past three years is 6.03%. The standard deviation of the fund over the past 5 years is 8.29% compared to the category average of 8.64%. 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.

If you believe interest rates will rise, this is an important factor to look at. FEMDX has a modified duration of 4.43, which suggests that the fund will decline 4.43% for every hundred-basis-point increase in interest rates.

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, FEMDX is a no load fund. It has an expense ratio of 1.00% compared to the category average of 0.92%. Looking at the fund from a cost perspective, FEMDX is actually more expensive than its peers.

This fund requires a minimum initial investment of $1.00 million, while there is no minimum for each subsequent investment.

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

Bottom Line

Overall, Franklin Emerging Market Debt Opportunity Adviser ( FEMDX ) 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 the International Bond - Emerging area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into FEMDX too 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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