On the lookout for a Muni - Bonds fund? Starting with Macquarie National HY Municipal A (CXHYX Quick QuoteCXHYX - Free Report) should not be a possibility at this time. CXHYX has a Zacks Mutual Fund Rank of 4 (Sell), which is based on various forecasting factors like size, cost, and past performance.

Objective

We classify CXHYX 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

Nomura is based in New York, NY, and is the manager of CXHYX. Macquarie National HY Municipal A made its debut in September of 1986, and since then, CXHYX has accumulated about $648.24 million in assets, per the most up-to-date date available. A team of investment professionals is the fund's current manager.

Performance

Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 1.4%, 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 4.57%, 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. Compared to the category average of 10.34%, the standard deviation of CXHYX over the past three years is 8.79%. Looking at the past 5 years, the fund's standard deviation is 9.31% compared to the category average of 11.43%. This makes the fund less 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. CXHYX has a modified duration of 9.6, which suggests that the fund will decline 9.6% 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 calculates the fund's average payout in a given year. For example, this fund's average coupon of 5.4% means that a $10,000 investment should result in a yearly payout of $540.

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. Since income is just one part of the bond picture, investors need to consider risk relative to broad benchmarks.

This fund has a beta of 0.86, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, CXHYX has a positive alpha of 1.68, 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, CXHYX has 19.58% in medium quality bonds, with ratings of "A" to "BBB". The fund has an average quality of BBB, and focuses on medium quality securities.

However, it is worth noting that 48% of the bonds in this fund are not ranked, so take the average quality level with a bit of caution.

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, CXHYX is a load fund. It has an expense ratio of 0.87% compared to the category average of 0.92%. CXHYX 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 $1,000; each subsequent investment needs to be at least $100.

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

Bottom Line

Overall, even with its comparatively similar performance, average downside risk, and lower fees, Macquarie National HY Municipal A ( CXHYX ) has a low Zacks Mutual Fund rank, and therefore looks a somewhat weak choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the Muni - Bonds, make sure to go to www.zacks.com/funds/mutual-funds 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.