Is LHYAX a Strong Bond Fund Right Now?

Having trouble finding a High Yield - Bonds fund? Well, Lord Abbett High Yield A (LHYAX) would not be a good potential starting point right now. LHYAX has a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on various forecasting factors like size, cost, and past performance.

Objective

LHYAX is part of the High Yield - Bonds section, which is a segment that boasts many possible options. Often referred to as "junk" bonds,High Yield - Bonds funds sit below investment grade, meaning they are at a high default risk compared to their investment grade peers. However, one advantage to junk bonds is that they generally pay out higher yields while posing similar interest rate risks to their investment grade counterparts.

History of Fund/Manager

Lord Abbett is responsible for LHYAX, and the company is based out of Jersey City, NJ. Since Lord Abbett High Yield A made its debut in December of 1998, LHYAX has garnered more than $707.10 million in assets. A team of investment professionals is the fund's current manager.

Performance

Of course, investors look for strong performance in funds. LHYAX has a 5-year annualized total return of 2.78%, and it sits in the bottom third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 8.13%, 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, LHYAX's standard deviation comes in at 4.64%, compared to the category average of 10.2%. Looking at the past 5 years, the fund's standard deviation is 6.8% compared to the category average of 12.04%. 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, and is a metric that's a good way to judge how fixed income securities will respond in a shifting rate environment.

For investors who think interest rates will rise, this is an important factor to consider. LHYAX has a modified duration of 3.11, which suggests that the fund will decline 3.11% 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. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 6.88% means that a $10,000 investment should result in a yearly payout of $688.

For those seeking a strong level of current income, a higher coupon is typically good news. However, it could pose 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.

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, LHYAX is a load fund. It has an expense ratio of 0.92% compared to the category average of 0.93%. From a cost perspective, LHYAX is actually cheaper than its peers.

While the minimum initial investment for the product is $1,500, investors should also note that 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, even with its comparatively weak performance, better downside risk, and lower fees, Lord Abbett High Yield A ( LHYAX ) has a low Zacks Mutual Fund rank, and therefore looks a somewhat weak choice for investors right now.

For additional information on the High Yield - Bonds 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 LHYAX 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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