Any investors hoping to find a Diversified Bonds fund could think about starting with The Osterweis Strategic Income Fund (OSTIX - Free Report) . OSTIX carries a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
The world of Diversified Bonds funds is an area filled with options, such as OSTIX. Investors looking for exposure to a variety of fixed income types that stretch across issuers, maturities, and credit levels will find a good fit with Diversified Bonds funds. Typically, these funds have a solid amount of exposure to government debt, as well as modest holdings in the corporate bond market.
History of Fund/Manager
Osterweis is based in San Francisco, CA, and is the manager of OSTIX. The Osterweis Strategic Income Fund debuted in August of 2002. Since then, OSTIX has accumulated assets of about $6.06 billion, according to the most recently available information. The fund is currently managed by a team of investment professionals.
Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 4.3%, and it sits in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 4.29%, which places it in the top 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. OSTIX's standard deviation over the past three years is 3.42% compared to the category average of 3.19%. Looking at the past 5 years, the fund's standard deviation is 3.01% compared to the category average of 3.19%. 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, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at.
For investors who think interest rates will rise, this is an important factor to consider. OSTIX has a modified duration of 1.57, which suggests that the fund will decline 1.57% for every hundred-basis-point increase in interest rates.
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. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 6.89% means that a $10,000 investment should result in a yearly payout of $689.
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. OSTIX carries a beta of 0.08, 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 3.72, which measures performance on a risk-adjusted basis.
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, OSTIX is a no load fund. It has an expense ratio of 0.88% compared to the category average of 0.91%. From a cost perspective, OSTIX is actually cheaper than its peers.
While the minimum initial investment for the product is $5,000, investors should also note that each subsequent investment needs to be at least $100.
Overall, The Osterweis Strategic Income Fund has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.
Don't stop here for your research on Diversified Bonds funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare OSTIX to its peers 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.