Is SEMMX a Strong Bond Fund Right Now?
There are plenty of choices in the Government - Bonds: Misc category, but where should you start your research? Well, one fund that might be worth investigating is Medalist MBS Total Return Instl (SEMMX). SEMMX has no Zacks Mutual Fund Rank, but we have been able to look into other metrics like performance, volatility, and cost.
Objective
SEMMX is one of many Government - Bonds: Misc funds to choose from. In their portfolios,Government - Bonds: Misc funds hold securities issued by the United States' federal government, which are often seen as risk-free assets and described as extremely low-risk from a default perspective. While a mixed approach usually results in a medium yield and risk profile, this fund category focuses across the curve, meaning the yields and interest rate sensitivity will vary.
History of Fund/Manager
Semper is based in New York, NY, and is the manager of SEMMX. Medalist MBS Total Return Instl made its debut in July of 2013, and since then, SEMMX has accumulated about $324.04 million in assets, per the most up-to-date date available. 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 4.96%, 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 10.98%, which places it in the top 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 9.57%, the standard deviation of SEMMX over the past three years is 2.76%. The standard deviation of the fund over the past 5 years is 4.41% compared to the category average of 11.03%. 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 investors who think interest rates will rise, this is an important factor to consider. SEMMX has a modified duration of 4.04, which suggests that the fund will decline 4.04% for every hundred-basis-point increase in interest rates.
Income
It is important to consider the fund's average coupon because income is often 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 6.11% means that a $10,000 investment should result in a yearly payout of $611.
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. Income is only one part of the bond picture, investors also need to consider risk relative to broad benchmarks.
SEMMX carries a beta of 0.22, 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 2.52, 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, SEMMX has 43.4% in medium quality bonds, with ratings of "A" to "BBB". The fund's junk bond component-bonds rated "BB" or below-is at 20.1%, giving SEMMX an average quality of BBB. This means that it focuses on medium quality securities.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, SEMMX is a no load fund. It has an expense ratio of 0.88% compared to the category average of 0.87%. SEMMX is actually more expensive than its peers when you consider factors like cost.
Investors need to be aware that with this product, the minimum initial investment is $1.00 million; each subsequent investment needs to be at least $1,000.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
This could just be the start of your research on SEMMX in the Government - Bonds: Misc 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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