On the lookout for a Investment Grade Bond - Intermediate fund? Starting with Principal Spectrum Preferred and Capital Securities Income A (PPSAX Quick QuotePPSAX - Free Report) is one possibility. PPSAX holds a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

We note that PPSAX is a Investment Grade Bond - Intermediate option, which is a segment loaded with many different investment options. By targeting bonds that mature in more than three years but less than 15 years, Investment Grade Bond - Intermediate funds are a middle of the curve option. Fixed income instruments at this maturity level usually have medium duration risk, but their yields are respectable, especially in comparison to their short-maturity counterparts. Additionally, a focus on investment grade makes these funds safer, but yields tend to be lower than in the junk bond category.

History of Fund/Manager

Principal Financial Group is responsible for PPSAX, and the company is based out of Des Moines, IA. The Principal Spectrum Preferred and Capital Securities Income A made its debut in October of 2005 and PPSAX has managed to accumulate roughly $625.14 million in assets, as of the most recently available information. The fund is currently managed by a team of investment professionals.

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 2.85%, and is in the bottom third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 7.82%, 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. The standard deviation of PPSAX over the past three years is 5.95% compared to the category average of 11.1%. The standard deviation of the fund over the past 5 years is 6.34% compared to the category average of 12.54%. 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.

If you believe interest rates will rise, this is an important factor to look at. PPSAX has a modified duration of 3.73, which suggests that the fund will decline 3.73% 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. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 6.83% means that a $10,000 investment should result in a yearly payout of $683.

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

With a beta of 0.06, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, PPSAX has a positive alpha of 1.98 , which measures performance on a risk-adjusted basis.

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, PPSAX is a load fund. It has an expense ratio of 1.04% compared to the category average of 0.97%. So, PPSAX is actually more expensive than its peers from a cost perspective.

While the minimum initial investment for the product is $1,000, investors should also note that 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 weak performance, better downside risk, and higher fees, Principal Spectrum Preferred and Capital Securities Income A ( PPSAX ) has a high Zacks Mutual Fund rank, and therefore looks a good potential choice for investors right now.

For additional information on the Investment Grade Bond - Intermediate 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 PPSAX too for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.