On the lookout for a Diversified Bonds fund? Starting with Metropolitan West Total Retail Bond I (MWTIX - Free Report) should not be a possibility at this time. MWTIX carries a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.
MWTIX is one of many Diversified Bonds funds to choose from. Diversified Bonds funds give investors exposure to a variety of fixed income types that span across different issuers, maturities, and credit levels. Usually, these funds will have a good amount of exposure to government debt, in addition to modest holdings in the corporate bond market.
History of Fund/Manager
Metropolitan is based in Los Angeles, CA, and is the manager of MWTIX. Since Metropolitan West Total Retail Bond I made its debut in April of 2000, MWTIX has garnered more than $48.34 billion in assets. A team of investment professionals is the fund's current manager.
Investors naturally seek funds with strong performance. MWTIX has a 5-year annualized total return of 2.07% and it sits 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 1.3%, which places it in the bottom third during this time-frame.
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. MWTIX's standard deviation over the past three years is 2.45% compared to the category average of 7.38%. Over the past 5 years, the standard deviation of the fund is 2.69% compared to the category average of 7.29%. This makes the fund less volatile than its peers over the past half-decade.
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 investors who think interest rates will rise, this is an important factor to consider. MWTIX has a modified duration of 5.68, which suggests that the fund will decline 5.68% for every hundred-basis-point increase in interest rates.
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 3.17% means that a $10,000 investment should result in a yearly payout of $317.
A higher coupon is good for those seeking a strong level of current income, but it could also pose a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond.
Income is only one part of the bond picture, investors also need to consider risk relative to broad benchmarks. With a beta of 0.87, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, MWTIX has a positive alpha of 0.19, which measures performance on a risk-adjusted basis.
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, MWTIX has 66.21% in high quality bonds rated at least 'AA' or higher, while 28.52% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of AA, and focuses on high quality securities.
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, MWTIX is a no load fund. It has an expense ratio of 0.44% compared to the category average of 0.91%. So, MWTIX is actually cheaper than its peers from a cost perspective.
While the minimum initial investment for the product is $3 million, investors should also note that each subsequent investment needs to be at least $50,000.
Overall, Metropolitan West Total Retail Bond I has a low Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a somewhat weak choice for investors right now.
This could just be the start of your research on MWTIXin the Diversified Bonds category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well 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.