Investment Grade Bond - Intermediate fund seekers should consider taking a look at Fidelity Strategic Real Return (FSRRX). FSRRX 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 FSRRX in the Investment Grade Bond - Intermediate category, an area rife with potential choices. Investment Grade Bond - Intermediate funds target the middle part of the curve, typically by investing in bonds that mature in more than three years but less than 15 years. At these maturity levels, fixed income instruments have medium duration risk--but they compensate investors with a respectable yield compared to shorter maturity options. Finally, a focus on investment grade ensures that these funds are safer, but yields will be lower than in the junk bond category.
History of Fund/Manager
Fidelity is based in Boston, MA, and is the manager of FSRRX. Fidelity Strategic Real Return debuted in September of 2005. Since then, FSRRX has accumulated assets of about $306.89 million, according to the most recently available information. The fund's current manager is a team of investment professionals.
Performance
Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 5.77%, and it sits in the top 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 8.57%, 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 10.44%, the standard deviation of FSRRX over the past three years is 5.09%. Over the past 5 years, the standard deviation of the fund is 7.49% compared to the category average of 12.23%. 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.
If you believe interest rates will rise, this is an important factor to look at. FSRRX has a modified duration of 3.22, which suggests that the fund will decline 3.22% for every hundred-basis-point increase in interest rates.
This fund has a beta of 0.36, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, FSRRX has a positive alpha of 4.58, 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, FSRRX has 45.6% in high quality bonds rated at least "AA" or higher, while its junk bond component-bonds rated "BB" or below-is at 37.5%. This means that 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, FSRRX is a no load fund. It has an expense ratio of 0.70% compared to the category average of 0.91%. FSRRX is actually cheaper than its peers when you consider factors like cost.
This fund requires a minimum initial investment of $0, 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, Fidelity Strategic Real Return ( FSRRX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.
This could just be the start of your research on FSRRX in the Investment Grade Bond - Intermediate 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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Get Your Free (FSRRX): Fund Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
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