Is PONPX a Strong Bond Fund Right Now?
Diversified Bonds fund seekers should consider taking a look at PIMCO Income I2 (PONPX). PONPX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.
Objective
We classify PONPX 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
PONPX finds itself in the PIMCO Funds family, based out of Newport Beach, CA. PIMCO Income I2 debuted in May of 2008. Since then, PONPX has accumulated assets of about $52.70 billion, according to the most recently available information. The fund's current manager is a team of investment professionals.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. PONPX has a 5-year annualized total return of 4.03%, and it sits in the middle 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 7.1%, 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. Compared to the category average of 12.71%, the standard deviation of PONPX over the past three years is 5.68%. The standard deviation of the fund over the past 5 years is 5.44% compared to the category average of 12.24%. This makes the fund less volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a given bond's interest rate sensitivity, and is a metric that's a good way to judge how fixed income securities will respond in a shifting rate environment.
If you believe interest rates will rise, this is an important factor to look at. PONPX has a modified duration of 4.72, which suggests that the fund will decline 4.72% for every hundred-basis-point increase in interest rates.
Income
We must remember to consider the fund's average coupon, as income is traditionally a big reason for purchasing a fixed income security. This metric takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 4.91% means that a $10,000 investment should result in a yearly payout of $491.
If you are looking for a strong level of current income, a higher coupon is a good choice, though it could pose a reinvestment risk; these risks can occur if rates are lower in the future when compared to the initial purchase date of the bond. Because income is only one part of the bond picture, investors should also consider risk relative to broad benchmarks.
PONPX carries a beta of 0.61, meaning that the fund is less volatile than a broad market index of fixed income securities. With this in mind, it has a positive alpha of 3.91, 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, PONPX has 74.07% 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, PONPX is a no load fund. It has an expense ratio of 0.60% compared to the category average of 0.94%. PONPX is actually cheaper than its peers when you consider factors like cost.
This fund requires a minimum initial investment of $1.00 million, 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, PIMCO Income I2 ( PONPX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, better downside risk, and lower fees, this fund looks like a good potential choice for investors right now.
Want even more information about PONPX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis 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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