Is PHYSX a Strong Bond Fund Right Now?

Any investors hoping to find a High Yield - Bonds fund could think about starting with PIA High Yield Institutional (PHYSX). PHYSX holds 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 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

PHYSX finds itself in the Pacific Income family, based out of El Segundo, CA. The PIA High Yield Institutional made its debut in December of 2010 and PHYSX has managed to accumulate roughly $94.99 million in assets, as of the most recently available information. The fund is currently managed by Lloyd McAdams who has been in charge of the fund since November of 2013.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund carries a 5-year annualized total return of 4.54%, and it sits 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 9.39%, 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. PHYSX's standard deviation over the past three years is 4.59% compared to the category average of 4.46%. Looking at the past 5 years, the fund's standard deviation is 5.8% compared to the category average of 6.07%. This makes the fund less volatile than its peers over the past half-decade.

Income

We must remember to consider the fund's average coupon, as income is traditionally 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 7.82% means that a $10,000 investment should result in a yearly payout of $782.

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.

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 and it has an expense ratio of 0.65%.

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

This puts this fund from Pacific Income in the top 20% of all mutual funds we have a rank on right now. As a result, this is likely an excellent choice for investors seeking an option in the High Yield - Bonds category.

This could just be the start of your research on PHYSX in 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. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.

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

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