If you've been stuck searching for Diversified Bonds funds, you might want to consider passing on by PIMCO Commodity Real Retail Strategy A (PCRAX Quick QuotePCRAX - Free Report) as a possibility. PCRAX bears a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on various forecasting factors like size, cost, and past performance.

Objective

We classify PCRAX in the Diversified Bonds category, an area that is rife with potential choices. Diversified Bonds funds offer exposure to a wide variety of fixed income types, stretching across various issuers, credit levels, and maturities. Generally speaking, bond funds here will have sizable exposure to government debt, as well as modest holdings in the corporate bond market too.

History of Fund/Manager

PCRAX finds itself in the PIMCO Funds family, based out of Newport Beach, CA. PIMCO Commodity Real Retail Strategy A made its debut in June of 2002, and since then, PCRAX has accumulated about $205.15 million in assets, per the most up-to-date date available. The fund's current manager is a team of investment professionals.

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 13.26%, and is in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of -0.83%, which places it in the bottom third during this time-frame.

It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

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. PCRAX's standard deviation over the past three years is 12.83% compared to the category average of 13.71%. The standard deviation of the fund over the past 5 years is 15.9% compared to the category average of 13.58%. 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. PCRAX has a modified duration of 3.25, which suggests that the fund will decline 3.25% for every hundred-basis-point increase in interest rates.

Income

We must remember to consider the fund's average coupon, as income is traditionally a big reason for purchasing a fixed income security. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 1.69% means that a $10,000 investment should result in a yearly payout of $169.

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. PCRAX carries a beta of -0.09, 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 13.31, 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, PCRAX has 86.18% in high quality bonds rated at least 'AA' or higher. The fund has an average quality of AAA, and focuses on high 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, PCRAX is a load fund. It has an expense ratio of 1.19% compared to the category average of 0.95%. So, PCRAX is actually more expensive than its peers from a cost perspective.

This fund requires a minimum initial investment of $1,000, and each subsequent investment should be at least $50.

Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.

Bottom Line

Overall, PIMCO Commodity Real Retail Strategy A ( PCRAX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and higher fees, this fund looks like a poor potential choice for investors right now.

Your research on the Diversified Bonds segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well 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.