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Is BHYAX a Strong Bond Fund Right Now?

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Any investors hoping to find a High Yield - Bonds fund could think about starting with BlackRock High Yield Bond A (BHYAX - Free Report) . BHYAX carries a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

BHYAX 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

BlackRock is based in New York, NY, and is the manager of BHYAX. The BlackRock High Yield Bond A made its debut in November of 1998 and BHYAX has managed to accumulate roughly $1.29 billion in assets, as of the most recently available information. A team of investment professionals is the fund's current manager.

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 2.75%, and it sits 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 8.03%, 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. Over the past three years, BHYAX's standard deviation comes in at 4.73%, compared to the category average of -27.39%. Over the past 5 years, the standard deviation of the fund is 5.23% compared to the category average of -25.69%. 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. BHYAX has a modified duration of 3.53, which suggests that the fund will decline 3.53% 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. This metric takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 6.49% means that a $10,000 investment should result in a yearly payout of $649.

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.

Income is only one part of the bond picture, investors also need to consider risk relative to broad benchmarks. With a beta of 0.13, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, BHYAX has a positive alpha of 1.87, 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, BHYAX 's junk bond component-bonds rated 'BB' or below-is at 90.14%. This means that the fund has an average quality of BBB, and focuses on medium quality securities.

Expenses

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, BHYAX is a load fund. It has an expense ratio of 0.93% compared to the category average of 1.17%. From a cost perspective, BHYAX 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, BlackRock High Yield Bond A ( BHYAX ) has a neutral Zacks Mutual Fund rank, weak performance, worse downside risk, and lower fees compared to its peers.

Don't stop here for your research on High Yield - 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 BHYAX to its peers as well for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.


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