Is PHYSX a Strong Bond Fund Right Now?

If investors are looking at the High Yield - Bonds fund category, PIA High Yield Institutional (PHYSX) could be a potential option. PHYSX carries a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

PHYSX is classified in the High Yield - Bonds segment by Zacks, an area full of investment possibilities. High Yield - Bonds funds come in below investment grade, and are referred to as " junk " bonds for this reason. Compared to their investment grade peers, these funds are at a higher default risk, but typically pay out higher yields while posing similar interest rate risks.

History of Fund/Manager

Pacific Income is based in El Segundo, CA, and is the manager of PHYSX. Since PIA High Yield Institutional made its debut in December of 2010, PHYSX has garnered more than $90.55 million in assets. The fund is currently managed by Lloyd McAdams who has been in charge of the fund since November of 2013.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 7.45%, and it sits in the top 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 7%, 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, PHYSX's standard deviation comes in at 6.72%, compared to the category average of 7.05%. The fund's standard deviation over the past 5 years is 6.5% compared to the category average of 6.73%. 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. PHYSX has a modified duration of 2.9, which suggests that the fund will decline 2.9% for every hundred-basis-point increase in interest rates.

This fund has a beta of 0, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, PHYSX has a positive alpha of 6.94, which measures performance on a risk-adjusted basis.

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, PHYSX is a no load fund. It has an expense ratio of 0.80% compared to the category average of 0.86%. From a cost perspective, PHYSX is actually cheaper than its peers.

Investors need to be aware that with this product, the minimum initial investment is $1,000; each subsequent investment needs to be at least $50.

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

Bottom Line

Overall, PIA High Yield Institutional ( PHYSX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

This could just be the start of your research on PHYSXin the High Yield - 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. 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.

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This article originally published on Zacks Investment Research (zacks.com).

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