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Is BHYSX a Strong Bond Fund Right Now?

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High Yield - Bonds fund seekers should consider taking a look at BlackRock High Yield Bond Services (BHYSX - Free Report) . BHYSX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

BHYSX 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

BHYSX finds itself in the BlackRock family, based out of New York, NY. The BlackRock High Yield Bond Services made its debut in November of 1998 and BHYSX has managed to accumulate roughly $82.89 million in assets, as of the most recently available information. Mitchell Garfin is the fund's current manager and has held that role since December of 2009.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund carries a 5-year annualized total return of 5.61%, 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 10.15%, which places it in the top 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. BHYSX's standard deviation over the past three years is 4.8% compared to the category average of 10.66%. Over the past 5 years, the standard deviation of the fund is 6.89% compared to the category average of 12.04%. 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.

For those that believe interest rates will rise, this is an important factor to consider. BHYSX has a modified duration of 2.93, which suggests that the fund will decline 2.93% for every hundred-basis-point increase in interest rates.

Income

It is important to consider the fund's average coupon because income is often a big reason for purchasing a fixed income security. This metric takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 7.06% means that a $10,000 investment should result in a yearly payout of $706.

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. Because income is only one part of the bond picture, investors should also consider risk relative to broad benchmarks.

BHYSX carries a beta of 0.3, 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 5.2, which measures performance on a risk-adjusted basis.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, BHYSX is a no load fund. It has an expense ratio of 0.90% compared to the category average of 0.94%. So, BHYSX is actually cheaper than its peers from a cost perspective.

Investors need to be aware that with this product, the minimum initial investment is $5,000; each subsequent investment has no minimum amount.

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

Bottom Line

Overall, BlackRock High Yield Bond Services ( BHYSX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, better downside risk, and lower fees, BlackRock High Yield Bond Services ( BHYSX ) 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 BHYSX 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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