Is NHMAX a Strong Bond Fund Right Now?

Having trouble finding a Muni - Bonds fund? Well, Nuveen High Yield Municipals Bond A (NHMAX) would not be a good potential starting point right now. NHMAX bears a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on various forecasting factors like size, cost, and past performance.

Objective

We classify NHMAX in the Muni - Bonds category, an area rife with potential choices. Muni - Bonds funds focus their investments on debt securities issued by state and local governments. These are typically used to pay for the construction of infrastructure, the operation of public schools, and other municipal functions. These securities can come in the form of revenue bonds, which are backed by taxes, as well as "general obligation" bonds that are not backed by a defined source. Investors are usually interested that come with most municipal bonds, which can be especially important for those in higher tax brackets.

History of Fund/Manager

Nuveen is based in Chicago, IL, and is the manager of NHMAX. Since Nuveen High Yield Municipals Bond A made its debut in June of 1999, NHMAX has garnered more than $5.22 billion in assets. The fund is currently managed by a team of investment professionals.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. NHMAX has a 5-year annualized total return of -0.4%, and it sits in the bottom third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 3.63%, 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 NHMAX over the past three years is 8.84% compared to the category average of 9.84%. The standard deviation of the fund over the past 5 years is 10.29% compared to the category average of 11.48%. 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. NHMAX has a modified duration of 13.21, which suggests that the fund will decline 13.21% 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 6.64% means that a $10,000 investment should result in a yearly payout of $664.

While a higher coupon is good for when you want a strong level of current income, it could present a reinvestment risk 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.

Ratings

However, it is worth noting that 72% of the bonds in this fund are not ranked, so take the average quality level with a bit of caution.

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, NHMAX is a load fund. It has an expense ratio of 0.76% compared to the category average of 0.92%. NHMAX is actually cheaper than its peers when you consider factors like cost.

This fund requires a minimum initial investment of $2,500, and each subsequent investment should 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, even with its comparatively weak performance, average downside risk, and lower fees, Nuveen High Yield Municipals Bond A ( NHMAX ) has a low Zacks Mutual Fund rank, and therefore looks a somewhat weak choice for investors right now.

This could just be the start of your research on NHMAX in the Muni - 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. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.

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

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