Is MWTRX a Strong Bond Fund Right Now?
There are plenty of choices in the Diversified Bonds category, but where should you start your research? Well, one fund that may not be worth investigating is Metropolitan West Total Retail Bond M (MWTRX). MWTRX carries a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on various forecasting factors like size, cost, and past performance.
Objective
We classify MWTRX in the Diversified Bonds category, an area that is rife with potential choices.Diversified Bonds funds offer exposure to a wide variety of fixed income types, stretching across various issuers, credit levels, and maturities. Generally speaking, bond funds here will have sizable exposure to government debt, as well as modest holdings in the corporate bond market too.
History of Fund/Manager
TCW is based in Los Angeles, CA, and is the manager of MWTRX. Since Metropolitan West Total Retail Bond M made its debut in April of 1997, MWTRX has garnered more than $2.04 billion in assets. A team of investment professionals is the fund's current manager.
Performance
Investors naturally seek funds with strong performance. MWTRX has a 5-year annualized total return of -0.33%, 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 3.33%, 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. Compared to the category average of 9.81%, the standard deviation of MWTRX over the past three years is 6.81%. The fund's standard deviation over the past 5 years is 7.32% compared to the category average of 11.39%. 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. MWTRX has a modified duration of 5.84, which suggests that the fund will decline 5.84% 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. This metric calculates the fund's average payout in a given year. For example, this fund's average coupon of 3.78% means that a $10,000 investment should result in a yearly payout of $378.
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 1.11, this fund is more volatile than a broad market index of fixed income securities. Taking this into account, MWTRX has a positive alpha of 0.02 , 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, MWTRX has 70.81% 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
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, MWTRX is a no load fund. It has an expense ratio of 0.68% compared to the category average of 0.88%. MWTRX is actually cheaper than its peers when you consider factors like cost.
This fund requires a minimum initial investment of $5,000, 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, even with its comparatively weak performance, average downside risk, and lower fees, Metropolitan West Total Retail Bond M ( MWTRX ) has a low Zacks Mutual Fund rank, and therefore looks a somewhat weak choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the Diversified Bonds, make sure to go to www.zacks.com/funds/mutual-funds for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."
Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.9% per year. So be sure to give these hand picked 7 your immediate attention.
See them now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Get Your Free (MWTRX): Fund Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
Source Zacks-com
