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On the lookout for a Muni - Bonds fund? Starting with T. Rowe Price Tax Free High Yield Retail (PRFHX - Free Report) should not be a possibility at this time. PRFHX holds a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.
Objective
Zacks categorizes PRFHX as Muni - Bonds, which is a segment packed with options. Muni - Bonds funds invest in debt securities issued by states or local municipalities. These are generally used to finance construction of infrastructure, pay for schools, or other government functions. Some are backed by taxes (revenue bonds), while others are " general obligation " and may not be backed by a defined source. Investors usually appreciate the tax benefits that come with many municipal bonds, which are especially impressive for those in high tax brackets.
History of Fund/Manager
T. Rowe Price is based in Baltimore, MD, and is the manager of PRFHX. T. Rowe Price Tax Free High Yield Retail debuted in March of 1985. Since then, PRFHX has accumulated assets of about $4.78 billion, according to the most recently available information. The fund is currently managed by James M. Murphy who has been in charge of the fund since January of 2001.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. PRFHX has a 5-year annualized total return of 4.76% and is in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 3.14%, 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. Compared to the category average of -22.69%, the standard deviation of PRFHX over the past three years is 3.57%. The fund's standard deviation over the past 5 years is 3.28% compared to the category average of -3.57%. This makes the fund more 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. PRFHX has a modified duration of 7.16, which suggests that the fund will decline 7.16% 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 takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 5.3% means that a $10,000 investment should result in a yearly payout of $530.
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. PRFHX carries a beta of 1.05, meaning that the fund is more volatile than a broad market index of fixed income securities. With this in mind, it has a positive alpha of 1.14, which measures performance on a risk-adjusted basis.
Ratings
However, it is worth noting that 23 % of the bonds in this fund are not ranked, so take the average quality level with a bit of caution.
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, PRFHX is a no load fund. It has an expense ratio of 0.72% compared to the category average of 0.30%. From a cost perspective, PRFHX is actually more expensive than its peers.
While the minimum initial investment for the product is $2,500, investors should also note that each subsequent investment needs to be at least $100.
Bottom Line
Overall, T. Rowe Price Tax Free High Yield Retail ( PRFHX ) has a low Zacks Mutual Fund rank, strong performance, worse downside risk, and higher fees compared to its peers.
Want even more information about PRFHX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis 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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Is PRFHX a Strong Bond Fund Right Now?
On the lookout for a Muni - Bonds fund? Starting with T. Rowe Price Tax Free High Yield Retail (PRFHX - Free Report) should not be a possibility at this time. PRFHX holds a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.
Objective
Zacks categorizes PRFHX as Muni - Bonds, which is a segment packed with options. Muni - Bonds funds invest in debt securities issued by states or local municipalities. These are generally used to finance construction of infrastructure, pay for schools, or other government functions. Some are backed by taxes (revenue bonds), while others are " general obligation " and may not be backed by a defined source. Investors usually appreciate the tax benefits that come with many municipal bonds, which are especially impressive for those in high tax brackets.
History of Fund/Manager
T. Rowe Price is based in Baltimore, MD, and is the manager of PRFHX. T. Rowe Price Tax Free High Yield Retail debuted in March of 1985. Since then, PRFHX has accumulated assets of about $4.78 billion, according to the most recently available information. The fund is currently managed by James M. Murphy who has been in charge of the fund since January of 2001.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. PRFHX has a 5-year annualized total return of 4.76% and is in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 3.14%, 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. Compared to the category average of -22.69%, the standard deviation of PRFHX over the past three years is 3.57%. The fund's standard deviation over the past 5 years is 3.28% compared to the category average of -3.57%. This makes the fund more 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. PRFHX has a modified duration of 7.16, which suggests that the fund will decline 7.16% 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 takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 5.3% means that a $10,000 investment should result in a yearly payout of $530.
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. PRFHX carries a beta of 1.05, meaning that the fund is more volatile than a broad market index of fixed income securities. With this in mind, it has a positive alpha of 1.14, which measures performance on a risk-adjusted basis.
Ratings
However, it is worth noting that 23 % of the bonds in this fund are not ranked, so take the average quality level with a bit of caution.
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, PRFHX is a no load fund. It has an expense ratio of 0.72% compared to the category average of 0.30%. From a cost perspective, PRFHX is actually more expensive than its peers.
While the minimum initial investment for the product is $2,500, investors should also note that each subsequent investment needs to be at least $100.
Bottom Line
Overall, T. Rowe Price Tax Free High Yield Retail ( PRFHX ) has a low Zacks Mutual Fund rank, strong performance, worse downside risk, and higher fees compared to its peers.
Want even more information about PRFHX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis 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.