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Is PONCX a Strong Bond Fund Right Now?

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Diversified Bonds fund seekers may want to consider taking a look at PIMCO Income C (PONCX - Free Report) . PONCX holds a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

The world of Diversified Bonds funds is an area filled with options, such as PONCX. 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

PONCX finds itself in the PIMCO Funds family, based out of Newport Beach, CA. PIMCO Income C made its debut in April of 2007, and since then, PONCX has accumulated about $8.26 billion in assets, per the most up-to-date date available. The fund is currently managed by Daniel J. Ivascyn who has been in charge of the fund since April of 2007.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund in particular has delivered a 5-year annualized total return of 3.88%, and is in the top third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 5.24%, 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. PONCX's standard deviation over the past three years is 2.01% compared to the category average of -9.03%. Looking at the past 5 years, the fund's standard deviation is 2.37% compared to the category average of -9.16%. This makes the fund more volatile than its peers over the past half-decade.

Bond Duration

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.

If you believe interest rates will rise, this is an important factor to look at. PONCX has a modified duration of 3.11, which suggests that the fund will decline 3.11% 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 takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 3.59% means that a $10,000 investment should result in a yearly payout of $359.

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.

Because income is only one part of the bond picture, investors should also consider risk relative to broad benchmarks. PONCX carries a beta of 0.35, 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 2.63, 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, PONCX has 25.95% in high quality bonds rated at least 'AA' or higher, while 30.43% are of medium quality, with ratings of 'A' to 'BBB'. The fund's junk bond component-bonds rated 'BB' or below-is at 33.21%, giving PONCX an average quality of BBB. This means that it focuses on medium quality securities.

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, PONCX is a no load fund. It has an expense ratio of 1.65% compared to the category average of 1.79%. Looking at the fund from a cost perspective, PONCX 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 needs to be at $50.

Bottom Line

Overall, PIMCO Income C ( PONCX ) has a neutral Zacks Mutual Fund rank, strong performance, worse downside risk, and lower fees compared to its peers.

Your research on the Diversified Bonds segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer 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.


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