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There are plenty of choices in the High Yield - Bonds category, but where should you start your research? Well, one fund that might be worth investigating is Federated Institutional High Yield Bond (FIHBX - Free Report) . FIHBX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
FIHBX 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
Federated is based in Pittsburgh, PA, and is the manager of FIHBX. Federated Institutional High Yield Bond made its debut in November of 2002, and since then, FIHBX has accumulated about $6.03 billion in assets, per the most up-to-date date available. The fund's current manager, Mark E. Durbiano, has been in charge of the fund since November of 2002.
Performance
Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 6.02%, 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 6.18%, 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. FIHBX's standard deviation over the past three years is 4.45% compared to the category average of -20.52%. The standard deviation of the fund over the past 5 years is 5.07% compared to the category average of -24.71%. 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, and is a metric that's a good way to judge how fixed income securities will respond in a shifting rate environment.
If you believe interest rates will rise, this is an important factor to look at. FIHBX has a modified duration of 2.8, which suggests that the fund will decline 2.8% 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. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 6.32% means that a $10,000 investment should result in a yearly payout of $632.
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.
Investors also need to consider risk relative to broad benchmarks, as income is only one part of the bond picture. This fund has a beta of 0.23, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, FIHBX has a positive alpha of 4.69, which measures performance on a risk-adjusted basis.
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, FIHBX is a no load fund. It has an expense ratio of 0.49% compared to the category average of 0.27%. So, FIHBX is actually more expensive than its peers from a cost perspective.
This fund requires a minimum initial investment of $1 million, while there is no minimum for each subsequent investment.
Bottom Line
Overall, Federated Institutional High Yield Bond ( FIHBX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, worse downside risk, and higher fees, this fund looks like a good potential choice for investors right now.
For additional information on the High Yield - 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 FIHBX too for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.
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Is FIHBX a Strong Bond Fund Right Now?
There are plenty of choices in the High Yield - Bonds category, but where should you start your research? Well, one fund that might be worth investigating is Federated Institutional High Yield Bond (FIHBX - Free Report) . FIHBX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
FIHBX 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
Federated is based in Pittsburgh, PA, and is the manager of FIHBX. Federated Institutional High Yield Bond made its debut in November of 2002, and since then, FIHBX has accumulated about $6.03 billion in assets, per the most up-to-date date available. The fund's current manager, Mark E. Durbiano, has been in charge of the fund since November of 2002.
Performance
Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 6.02%, 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 6.18%, 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. FIHBX's standard deviation over the past three years is 4.45% compared to the category average of -20.52%. The standard deviation of the fund over the past 5 years is 5.07% compared to the category average of -24.71%. 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, and is a metric that's a good way to judge how fixed income securities will respond in a shifting rate environment.
If you believe interest rates will rise, this is an important factor to look at. FIHBX has a modified duration of 2.8, which suggests that the fund will decline 2.8% 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. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 6.32% means that a $10,000 investment should result in a yearly payout of $632.
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.
Investors also need to consider risk relative to broad benchmarks, as income is only one part of the bond picture. This fund has a beta of 0.23, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, FIHBX has a positive alpha of 4.69, which measures performance on a risk-adjusted basis.
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, FIHBX is a no load fund. It has an expense ratio of 0.49% compared to the category average of 0.27%. So, FIHBX is actually more expensive than its peers from a cost perspective.
This fund requires a minimum initial investment of $1 million, while there is no minimum for each subsequent investment.
Bottom Line
Overall, Federated Institutional High Yield Bond ( FIHBX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, worse downside risk, and higher fees, this fund looks like a good potential choice for investors right now.
For additional information on the High Yield - 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 FIHBX too for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.