Is PCRAX a Strong Bond Fund Right Now?
On the lookout for a Diversified Bonds fund? Starting with PIMCO Commodity Real Retail Strategy A (PCRAX) should not be a possibility at this time. PCRAX holds 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 PCRAX 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
PCRAX is a part of the PIMCO Funds family of funds, a company based out of Newport Beach, CA. Since PIMCO Commodity Real Retail Strategy A made its debut in June of 2002, PCRAX has garnered more than $218.86 million in assets. The fund's current manager is a team of investment professionals.
Performance
Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of 10.43%, and it sits in the middle 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 4.47%, 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, PCRAX's standard deviation comes in at 9.98%, compared to the category average of 11%. Looking at the past 5 years, the fund's standard deviation is 14.92% compared to the category average of 12.8%. This makes the fund more 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 investors who think interest rates will rise, this is an important factor to consider. PCRAX has a modified duration of 3.32, which suggests that the fund will decline 3.32% for every hundred-basis-point increase in interest rates.
Income
Income is often a big reason for purchasing a fixed income security, so it is important to consider the fund's average coupon. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 1.69% means that a $10,000 investment should result in a yearly payout of $169.
A higher coupon is good for those seeking a strong level of current income, but it could also 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.
This fund has a beta of 0.02, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, PCRAX has a positive alpha of 9.74, 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, PCRAX has 85.46% 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, PCRAX is a load fund and it has an expense ratio of 1.18%.
While the minimum initial investment for the product is $1,000, investors should also note that each subsequent investment needs to be at least $50.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
With a 'strong sell' rank, PIMCO Commodity Real Retail Strategy A is in the bottom 20% of all mutual funds we cover. This means that our models suggest it is one of the worst options for investors in Diversified Bonds right now, though this could change if the performance of the fund and the Zacks Ranks of the equities in PCRAX turnaround in the next data release.
This could just be the start of your research on PCRAX in the Diversified Bonds category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank 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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