Is WMFAX a Strong Bond Fund Right Now?
There are plenty of choices in the Muni - Bonds category, but where should you start your research? Well, one fund that you should consider investigating is Allspring Municipal Bond A (WMFAX). WMFAX carries a Zacks Mutual Fund Rank of 3 (Hold), which is based on various forecasting factors like size, cost, and past performance.
Objective
WMFAX is one of many Muni - Bonds funds to choose from. Muni - Bonds funds invest in debt securities issued by states and local municipalities, which are typically used to pay for infrastructure construction, schools, and other government functions. These securities can be backed by taxes (revenue bonds), but others are known as "general obligation" and are not necessarily backed by a defined source. These bonds are especially attractive because of their inherent tax benefits.
History of Fund/Manager
Allspring is based in San Francisco, CA, and is the manager of WMFAX. Allspring Municipal Bond A debuted in April of 2005. Since then, WMFAX has accumulated assets of about $654.19 million, according to the most recently available information. The fund is currently managed by a team of investment professionals.
Performance
Investors naturally seek funds with strong performance. WMFAX has a 5-year annualized total return of 0.69%, and it sits 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 3.36%, 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. Compared to the category average of 10.75%, the standard deviation of WMFAX over the past three years is 5.04%. Over the past 5 years, the standard deviation of the fund is 5.42% compared to the category average of 11.99%. 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. WMFAX has a modified duration of 7.7, which suggests that the fund will decline 7.7% for every hundred-basis-point increase in interest rates.
Income
Since income is, of course, a big reason for purchasing a fixed income security, it is always important to consider the fund's average coupon. This metric calculates the fund's average payout in a given year. For example, this fund's average coupon of 4.67% means that a $10,000 investment should result in a yearly payout of $467.
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. Investors also need to consider risk relative to broad benchmarks, as income is only one part of the bond picture.
This fund has a beta of 0.54, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, WMFAX has a negative alpha of -0.5, 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, WMFAX has 52% in high quality bonds rated at least "AA" or higher, while 43.6% are of medium quality, with ratings of "A" to "BBB". The fund has an average quality of A, and focuses on high 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, WMFAX is a load fund. It has an expense ratio of 0.74% compared to the category average of 0.88%. So, WMFAX is actually cheaper than its peers from a cost perspective.
While the minimum initial investment for the product is $1,000, investors should also note that each subsequent investment needs to be at least $100.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
Overall, Allspring Municipal Bond A ( WMFAX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, better downside risk, and lower fees, Allspring Municipal Bond A ( WMFAX ) looks like a somewhat average choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the Muni - Bonds, make sure to go to www.zacks.com/funds/mutual-funds for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.
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This article originally published on Zacks Investment Research (zacks.com).
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