Having trouble finding a Muni - Bonds fund? Victory Tax-Exempt IT (USATX Quick QuoteUSATX - Free Report) is a potential starting point. USATX possesses a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

We classify USATX in the Muni - Bonds category, an area rife with potential choices. Muni - Bonds funds focus their investments on debt securities issued by state and local governments. These are typically used to pay for the construction of infrastructure, the operation of public schools, and other municipal functions. These securities can come in the form of revenue bonds, which are backed by taxes, as well as "general obligation" bonds that are not backed by a defined source. Investors are usually interested that come with most municipal bonds, which can be especially important for those in higher tax brackets.

History of Fund/Manager

Victory is responsible for USATX, and the company is based out of Columbus, OH. Victory Tax-Exempt IT made its debut in March of 1982, and since then, USATX has accumulated about $2.29 billion in assets, per the most up-to-date date available. Andrew Hattman is the fund's current manager and has held that role since July of 2019.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. USATX has a 5-year annualized total return of 1.53%, and it sits in the top third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 5.43%, which places it in the middle 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. Over the past three years, USATX's standard deviation comes in at 5.19%, compared to the category average of 9.69%. The fund's standard deviation over the past 5 years is 5.2% compared to the category average of 10.55%. 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, and is a metric that's a good way to judge how fixed income securities will respond in a shifting rate environment.

For those that believe interest rates will rise, this is an important factor to consider. USATX has a modified duration of 5.58, which suggests that the fund will decline 5.58% 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. This metric calculates the fund's average payout in a given year. For example, this fund's average coupon of 4.55% means that a $10,000 investment should result in a yearly payout of $455.

For those seeking a strong level of current income, a higher coupon is typically good news. However, it could pose 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 0.47, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, USATX has a positive alpha of 0.04 , 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, USATX is a no load fund. It has an expense ratio of 0.48% compared to the category average of 0.83%. USATX is actually cheaper than its peers when you consider factors like cost.

Investors need to be aware that with this product, the minimum initial investment is $3,000; each subsequent investment needs to be at least $50.

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

Bottom Line

Overall, Victory Tax-Exempt IT ( USATX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, better downside risk, and lower fees, Victory Tax-Exempt IT ( USATX ) looks like a good potential choice for investors right now.

Your research on the Muni - 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 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.