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If investors are looking at the Muni - Bonds fund category, Oppenheimer Rochester High Yield Municipals A (ORNAX - Free Report) could be a potential option. ORNAX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
Zacks categorizes ORNAX 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
ORNAX is a part of the Invesco family of funds, a company based out of Kansas City, MO. Since Oppenheimer Rochester High Yield Municipals A made its debut in October of 1993, ORNAX has garnered more than $3.99 billion in assets. Scott S. Cottier is the fund's current manager and has held that role since September of 2002.
Performance
Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 7.93%, 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 8.01%, 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 ORNAX over the past three years is 5.23% compared to the category average of -46.98%. Looking at the past 5 years, the fund's standard deviation is 4.73% compared to the category average of -3.21%. This makes the fund more 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 investors who think interest rates will rise, this is an important factor to consider. ORNAX has a modified duration of 8.64, which suggests that the fund will decline 8.64% 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. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 6.21% means that a $10,000 investment should result in a yearly payout of $621.
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. With a beta of 1, this fund is volatile than a broad market index of fixed income securities. Taking this into account, ORNAX has a positive alpha of 3.97, 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, ORNAX has 24.53% in high quality bonds rated at least 'AA' or higher, while its junk bond component-bonds rated 'BB' or below-is at 21.25%. This means that the fund has an average quality of BBB, and focuses on medium quality securities.
However, it is worth noting that 35 % of the bonds in this fund are not ranked, so take the average quality level with a bit of caution.
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, ORNAX is a load fund. It has an expense ratio of 0.70% compared to the category average of 1.24%. ORNAX is actually cheaper than its peers when you consider factors like cost.
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, Oppenheimer Rochester High Yield Municipals A ( ORNAX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, worse downside risk, and lower fees, Oppenheimer Rochester High Yield Municipals A ( ORNAX ) looks like a good potential choice for investors right now.
For additional information on the Muni - Bonds area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into ORNAX too 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.
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Is ORNAX a Strong Bond Fund Right Now?
If investors are looking at the Muni - Bonds fund category, Oppenheimer Rochester High Yield Municipals A (ORNAX - Free Report) could be a potential option. ORNAX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
Zacks categorizes ORNAX 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
ORNAX is a part of the Invesco family of funds, a company based out of Kansas City, MO. Since Oppenheimer Rochester High Yield Municipals A made its debut in October of 1993, ORNAX has garnered more than $3.99 billion in assets. Scott S. Cottier is the fund's current manager and has held that role since September of 2002.
Performance
Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 7.93%, 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 8.01%, 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 ORNAX over the past three years is 5.23% compared to the category average of -46.98%. Looking at the past 5 years, the fund's standard deviation is 4.73% compared to the category average of -3.21%. This makes the fund more 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 investors who think interest rates will rise, this is an important factor to consider. ORNAX has a modified duration of 8.64, which suggests that the fund will decline 8.64% 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. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 6.21% means that a $10,000 investment should result in a yearly payout of $621.
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. With a beta of 1, this fund is volatile than a broad market index of fixed income securities. Taking this into account, ORNAX has a positive alpha of 3.97, 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, ORNAX has 24.53% in high quality bonds rated at least 'AA' or higher, while its junk bond component-bonds rated 'BB' or below-is at 21.25%. This means that the fund has an average quality of BBB, and focuses on medium quality securities.
However, it is worth noting that 35 % of the bonds in this fund are not ranked, so take the average quality level with a bit of caution.
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, ORNAX is a load fund. It has an expense ratio of 0.70% compared to the category average of 1.24%. ORNAX is actually cheaper than its peers when you consider factors like cost.
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, Oppenheimer Rochester High Yield Municipals A ( ORNAX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, worse downside risk, and lower fees, Oppenheimer Rochester High Yield Municipals A ( ORNAX ) looks like a good potential choice for investors right now.
For additional information on the Muni - Bonds area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into ORNAX too 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.