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On the lookout for a Diversified Bonds fund? Starting with PIMCO Income P (PONPX - Free Report) is one possibility. PONPX carries a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
PONPX is one of many Diversified Bonds funds to choose from. Diversified Bonds funds give investors exposure to a variety of fixed income types that span across different issuers, maturities, and credit levels. Usually, these funds will have a good amount of exposure to government debt, in addition to modest holdings in the corporate bond market.
History of Fund/Manager
PIMCO Funds is based in Newport Beach, CA, and is the manager of PONPX. PIMCO Income P debuted in May of 2008. Since then, PONPX has accumulated assets of about $25.56 billion, according to the most recently available information. Daniel J. Ivascyn is the fund's current manager and has held that role since May of 2008.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 5.16%, 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 5.4%, which places it in the top third during this time-frame.
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. PONPX's standard deviation over the past three years is 2.14% compared to the category average of 7.78%. The standard deviation of the fund over the past 5 years is 2.44% compared to the category average of 7.61%. This makes the fund less volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a given bond's interest rate sensitivity, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at.
If you believe interest rates will rise, this is an important factor to look at. PONPX has a modified duration of 3.11, which suggests that the fund will decline 3.11% for every hundred-basis-point increase in interest rates.
Income
Income is often a big reason for purchasing a fixed income security, so it is 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 3.59% means that a $10,000 investment should result in a yearly payout of $359.
For those seeking a strong level of current income, a higher coupon is typically good news. However, it could pose 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. PONPX carries a beta of 0.38, 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 4.02, 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, PONPX has 25.95% in high quality bonds rated at least 'AA' or higher, while 30.43% are of medium quality, with ratings of 'A' to 'BBB'. The fund's junk bond component-bonds rated 'BB' or below-is at 33.21%, giving PONPX an average quality of BBB. This means that it focuses on medium quality securities.
Expenses
As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, PONPX is a no load fund. It has an expense ratio of 0.58% compared to the category average of 0.91%. From a cost perspective, PONPX is actually cheaper than its peers.
While the minimum initial investment for the product is $1 million, investors should also note that there is no minimum for each subsequent investment.
Bottom Line
Overall, PIMCO Income P ( PONPX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, better downside risk, and lower fees, this fund looks like a good potential choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the Diversified Bonds, make sure to go to www.zacks.com/funds/mutual-funds for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.
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Is PONPX a Strong Bond Fund Right Now?
On the lookout for a Diversified Bonds fund? Starting with PIMCO Income P (PONPX - Free Report) is one possibility. PONPX carries a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
PONPX is one of many Diversified Bonds funds to choose from. Diversified Bonds funds give investors exposure to a variety of fixed income types that span across different issuers, maturities, and credit levels. Usually, these funds will have a good amount of exposure to government debt, in addition to modest holdings in the corporate bond market.
History of Fund/Manager
PIMCO Funds is based in Newport Beach, CA, and is the manager of PONPX. PIMCO Income P debuted in May of 2008. Since then, PONPX has accumulated assets of about $25.56 billion, according to the most recently available information. Daniel J. Ivascyn is the fund's current manager and has held that role since May of 2008.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 5.16%, 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 5.4%, which places it in the top third during this time-frame.
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. PONPX's standard deviation over the past three years is 2.14% compared to the category average of 7.78%. The standard deviation of the fund over the past 5 years is 2.44% compared to the category average of 7.61%. This makes the fund less volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a given bond's interest rate sensitivity, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at.
If you believe interest rates will rise, this is an important factor to look at. PONPX has a modified duration of 3.11, which suggests that the fund will decline 3.11% for every hundred-basis-point increase in interest rates.
Income
Income is often a big reason for purchasing a fixed income security, so it is 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 3.59% means that a $10,000 investment should result in a yearly payout of $359.
For those seeking a strong level of current income, a higher coupon is typically good news. However, it could pose 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. PONPX carries a beta of 0.38, 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 4.02, 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, PONPX has 25.95% in high quality bonds rated at least 'AA' or higher, while 30.43% are of medium quality, with ratings of 'A' to 'BBB'. The fund's junk bond component-bonds rated 'BB' or below-is at 33.21%, giving PONPX an average quality of BBB. This means that it focuses on medium quality securities.
Expenses
As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, PONPX is a no load fund. It has an expense ratio of 0.58% compared to the category average of 0.91%. From a cost perspective, PONPX is actually cheaper than its peers.
While the minimum initial investment for the product is $1 million, investors should also note that there is no minimum for each subsequent investment.
Bottom Line
Overall, PIMCO Income P ( PONPX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, better downside risk, and lower fees, this fund looks like a good potential choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the Diversified Bonds, make sure to go to www.zacks.com/funds/mutual-funds for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.