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Is EAFAX a Strong Bond Fund Right Now?

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There are plenty of choices in the High Yield - Bonds category, but where should you start your research? Well, one fund that might be worth investigating is Eaton Vance Floating-Rate Advantage A (EAFAX - Free Report) . EAFAX bears a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

EAFAX 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

EAFAX is a part of the Eaton Vance family of funds, a company based out of Boston, MA. Eaton Vance Floating-Rate Advantage A debuted in April of 2008. Since then, EAFAX has accumulated assets of about $1.69 billion, according to the most recently available information. Scott H. Page is the fund's current manager and has held that role since April of 2008.

Performance

Of course, investors look for strong performance in funds. EAFAX has a 5-year annualized total return of 4.09% 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 5.97%, which places it in the middle 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. Compared to the category average of 7.89%, the standard deviation of EAFAX over the past three years is 3.27%. Over the past 5 years, the standard deviation of the fund is 6.51% compared to the category average of 7.69%. 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.

If you believe interest rates will rise, this is an important factor to look at. EAFAX has a modified duration of 0.2, which suggests that the fund will decline 0.2% for every hundred-basis-point increase in interest rates.

Income

We must remember to consider the fund's average coupon, as income is traditionally a big reason for purchasing a fixed income security. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 5.18% means that a $10,000 investment should result in a yearly payout of $518.

While a higher coupon is good for when you want a strong level of current income, it could present 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. With a beta of 0.05, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, EAFAX has a positive alpha of 3.95, 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, EAFAX is a load fund. It has an expense ratio of 0.94% compared to the category average of 1.03%. From a cost perspective, EAFAX is actually cheaper than its peers.

Investors should also note that the minimum initial investment for the product is $1,000 and that each subsequent investment has no minimum amount.

Bottom Line

Overall, Eaton Vance Floating-Rate Advantage A ( EAFAX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, Eaton Vance Floating-Rate Advantage A ( EAFAX ) looks like a great potential choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the High Yield - Bonds, make sure to go to www.zacks.com/funds/mutual-funds for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.


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