Is FSRRX a Strong Bond Fund Right Now?
Having trouble finding a Investment Grade Bond - Intermediate fund? Well, Fidelity Strategic Real Return (FSRRX) would not be a good potential starting point right now. FSRRX bears a Zacks Mutual Fund Rank of 4 (Sell), which is based on various forecasting factors like size, cost, and past performance.
Objective
We note that FSRRX is a Investment Grade Bond - Intermediate option, which is a segment loaded with many different investment options. By targeting bonds that mature in more than three years but less than 15 years, Investment Grade Bond - Intermediate funds are a middle of the curve option. Fixed income instruments at this maturity level usually have medium duration risk, but their yields are respectable, especially in comparison to their short-maturity counterparts. Additionally, a focus on investment grade makes these funds safer, but yields tend to be lower than in the junk bond category.
History of Fund/Manager
Fidelity is based in Boston, MA, and is the manager of FSRRX. The Fidelity Strategic Real Return made its debut in September of 2005 and FSRRX has managed to accumulate roughly $282.88 million in assets, as of the most recently available information. The fund is currently managed by a team of investment professionals.
Performance
Of course, investors look for strong performance in funds. FSRRX has a 5-year annualized total return of 7.07%, 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 7%, which places it in the bottom 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. FSRRX's standard deviation over the past three years is 5.54% compared to the category average of 10.62%. Over the past 5 years, the standard deviation of the fund is 7.52% compared to the category average of 12%. 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. FSRRX has a modified duration of 3.48, which suggests that the fund will decline 3.48% for every hundred-basis-point increase in interest rates.
FSRRX carries a beta of 0.15, 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 6.2, 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, FSRRX has 42.85% in high quality bonds rated at least "AA" or higher, while its junk bond component-bonds rated "BB" or below-is at 41.4%. This means that the fund has an average quality of A, and focuses on high quality securities.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, FSRRX is a no load fund and it has an expense ratio of 0.70%.
This fund requires a minimum initial investment of $0, 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
As a mutual fund with a 'sell' rank, FSRRX is in the bottom 40% of all funds we cover and it may be one to avoid putting on your short list of possible picks in Investment Grade Bond - Intermediate. This fund from Fidelity needs to turn around some of its key fundamental metrics such as the Zacks Ranks of its holdings, alpha, and performance in order for investors to consider Fidelity Strategic Real Return in the future.
For additional information on the Investment Grade Bond - Intermediate 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 FSRRX too for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.
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This article originally published on Zacks Investment Research (zacks.com).
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