Is PHYSX a Strong Bond Fund Right Now?

If you have been looking for High Yield - Bonds funds, a place to start could be PIA High Yield Institutional (PHYSX). PHYSX has a Zacks Mutual Fund Rank of 2 (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 is a part of the Pacific Income family of funds, a company based out of El Segundo, CA. PIA High Yield Institutional debuted in December of 2010. Since then, PHYSX has accumulated assets of about $96.74 million, according to the most recently available information. The fund's current manager, Lloyd McAdams, has been in charge of the fund since November of 2013.

Performance

Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 3.86%, and is in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 7.11%, 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. The standard deviation of PHYSX over the past three years is 4.3% compared to the category average of 4.04%. Looking at the past 5 years, the fund's standard deviation is 5.84% compared to the category average of 6.05%. 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 7.92% means that a $10,000 investment should result in a yearly payout of $792.

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. Since income is just one part of the bond picture, investors need to consider risk relative to broad benchmarks.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, PHYSX is a no load fund. It has an expense ratio of 0.65% compared to the category average of 0.87%. PHYSX is actually cheaper than its peers when you consider factors like cost.

Investors should also note that the minimum initial investment for the product is $1,000 and that each subsequent investment needs to be at $50.

Fees charged by investment advisors have not been taken into consideration. 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 similar performance, average downside risk, and lower fees, this fund looks like a great potential choice for investors right now.

Don't stop here for your research on High Yield - Bonds funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare PHYSX to its peers as well 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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This article originally published on Zacks Investment Research (zacks.com).

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