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Any investors hoping to find a High Yield - Bonds fund could think about starting with Lord Abbett Bond Debenture A (LBNDX - Free Report) . LBNDX holds a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
LBNDX is part of the High Yield - Bonds section, which is a segment that boasts many possible options. Often referred to as " junk " bonds, High Yield - Bonds funds sit below investment grade, meaning they are at a high default risk compared to their investment grade peers. However, one advantage to junk bonds is that they generally pay out higher yields while posing similar interest rate risks to their investment grade counterparts.
History of Fund/Manager
Lord Abbett is based in Jersey City, NJ, and is the manager of LBNDX. Lord Abbett Bond Debenture A debuted in April of 1971. Since then, LBNDX has accumulated assets of about $4.25 billion, according to the most recently available information. The fund is currently managed by a team of investment professionals.
Performance
Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 4.35%, and is 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 6.52%, 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. The standard deviation of LBNDX over the past three years is 4.07% compared to the category average of 8.4%. Over the past 5 years, the standard deviation of the fund is 4.81% compared to the category average of 8.79%. 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. LBNDX has a modified duration of 5.63, which suggests that the fund will decline 5.63% for every hundred-basis-point increase in interest rates.
Income
Since income is, of course, a big reason for purchasing a fixed income security, it is always important to consider the fund's average coupon. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 5.32% means that a $10,000 investment should result in a yearly payout of $532.
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.
Investors also need to consider risk relative to broad benchmarks, as income is only one part of the bond picture. With a beta of 0.45, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, LBNDX has a positive alpha of 2.86, 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, LBNDX has 28.4% in medium quality bonds, with ratings of 'A' to 'BBB'. The fund's junk bond component-bonds rated 'BB' or below-is at 51.45%, giving LBNDX an average quality of BBB. This means that it focuses on medium 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, LBNDX is a load fund. It has an expense ratio of 0.79% compared to the category average of 1.02%. Looking at the fund from a cost perspective, LBNDX is actually cheaper than its peers.
While the minimum initial investment for the product is $1,000, investors should also note that there is no minimum for each subsequent investment.
Bottom Line
Overall, Lord Abbett Bond Debenture A ( LBNDX ) has a high Zacks Mutual Fund rank, strong performance, average downside risk, and lower fees compared to its peers.
This could just be the start of your research on LBNDXin the High Yield - 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. 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 LBNDX a Strong Bond Fund Right Now?
Any investors hoping to find a High Yield - Bonds fund could think about starting with Lord Abbett Bond Debenture A (LBNDX - Free Report) . LBNDX holds a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
LBNDX is part of the High Yield - Bonds section, which is a segment that boasts many possible options. Often referred to as " junk " bonds, High Yield - Bonds funds sit below investment grade, meaning they are at a high default risk compared to their investment grade peers. However, one advantage to junk bonds is that they generally pay out higher yields while posing similar interest rate risks to their investment grade counterparts.
History of Fund/Manager
Lord Abbett is based in Jersey City, NJ, and is the manager of LBNDX. Lord Abbett Bond Debenture A debuted in April of 1971. Since then, LBNDX has accumulated assets of about $4.25 billion, according to the most recently available information. The fund is currently managed by a team of investment professionals.
Performance
Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 4.35%, and is 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 6.52%, 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. The standard deviation of LBNDX over the past three years is 4.07% compared to the category average of 8.4%. Over the past 5 years, the standard deviation of the fund is 4.81% compared to the category average of 8.79%. 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. LBNDX has a modified duration of 5.63, which suggests that the fund will decline 5.63% for every hundred-basis-point increase in interest rates.
Income
Since income is, of course, a big reason for purchasing a fixed income security, it is always important to consider the fund's average coupon. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 5.32% means that a $10,000 investment should result in a yearly payout of $532.
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.
Investors also need to consider risk relative to broad benchmarks, as income is only one part of the bond picture. With a beta of 0.45, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, LBNDX has a positive alpha of 2.86, 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, LBNDX has 28.4% in medium quality bonds, with ratings of 'A' to 'BBB'. The fund's junk bond component-bonds rated 'BB' or below-is at 51.45%, giving LBNDX an average quality of BBB. This means that it focuses on medium 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, LBNDX is a load fund. It has an expense ratio of 0.79% compared to the category average of 1.02%. Looking at the fund from a cost perspective, LBNDX is actually cheaper than its peers.
While the minimum initial investment for the product is $1,000, investors should also note that there is no minimum for each subsequent investment.
Bottom Line
Overall, Lord Abbett Bond Debenture A ( LBNDX ) has a high Zacks Mutual Fund rank, strong performance, average downside risk, and lower fees compared to its peers.
This could just be the start of your research on LBNDXin the High Yield - 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. 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.