There are plenty of choices in the Diversified Bonds category, but where should you start your research? Well, one fund that might be worth investigating is PIMCO Income C (PONCX). PONCX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.
Objective
The world of Diversified Bonds funds is an area filled with options, such as PONCX. Investors looking for exposure to a variety of fixed income types that stretch across issuers, maturities, and credit levels will find a good fit with Diversified Bonds funds. Typically, these funds have a solid amount of exposure to government debt, as well as modest holdings in the corporate bond market.
History of Fund/Manager
PIMCO Funds is based in Newport Beach, CA, and is the manager of PONCX. Since PIMCO Income C made its debut in April of 2007, PONCX has garnered more than $3.44 billion in assets. 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. This fund in particular has delivered a 5-year annualized total return of 2.26%, 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 5.54%, 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. Over the past three years, PONCX's standard deviation comes in at 5%, compared to the category average of 10.15%. The standard deviation of the fund over the past 5 years is 5.61% compared to the category average of 11.79%. 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. PONCX has a modified duration of 6.13, which suggests that the fund will decline 6.13% 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. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 5.02% means that a $10,000 investment should result in a yearly payout of $502.
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. Since income is just one part of the bond picture, investors need to consider risk relative to broad benchmarks.
This fund has a beta of 0.73, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, PONCX has a positive alpha of 1.71, 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, PONCX has 73.5% 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, PONCX is a no load fund. It has an expense ratio of 1.65% compared to the category average of 0.93%. Looking at the fund from a cost perspective, PONCX is actually more expensive than its peers.
While the minimum initial investment for the product is $1,000, investors should also note that each subsequent investment needs to be at least $50.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
Overall, PIMCO Income C ( PONCX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, better downside risk, and higher fees, this fund looks like a good potential choice for investors right now.
Don't stop here for your research on Diversified Bonds funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare PONCX to its peers as well for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.
Zacks' Research Chief Names "Stock Most Likely to Double"
Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.
Of course, all our elite picks aren't winners, but this one could far surpass earlier Zacks' Stocks Set to Double like D-Wave Quantum, which shot up +680.1%.
Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Get Your Free (PONCX): Fund Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
