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Is ACTHX a Strong Bond Fund Right Now?

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Muni - Bonds fund seekers should not consider taking a look at Invesco High Yield Municipals A (ACTHX - Free Report) at this time. ACTHX bears a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

Zacks categorizes ACTHX as Muni - Bonds, which is a segment packed with options. Muni - Bonds funds invest in debt securities issued by states or local municipalities. These are generally used to finance construction of infrastructure, pay for schools, or other government functions. Some are backed by taxes (revenue bonds), while others are " general obligation " and may not be backed by a defined source. Investors usually appreciate the tax benefits that come with many municipal bonds, which are especially impressive for those in high tax brackets.

History of Fund/Manager

ACTHX is a part of the Invesco family of funds, a company based out of Kansas City, MO. The Invesco High Yield Municipals A made its debut in January of 1986 and ACTHX has managed to accumulate roughly $5.40 billion in assets, as of the most recently available information. The fund's current manager is a team of investment professionals.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 5.98%, 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 3.91%, 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. The standard deviation of ACTHX over the past three years is 4.14% compared to the category average of -21.11%. The fund's standard deviation over the past 5 years is 3.79% compared to the category average of -3.57%. This makes the fund more 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. ACTHX has a modified duration of 8.65, which suggests that the fund will decline 8.65% 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 6.33% means that a $10,000 investment should result in a yearly payout of $633.

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.

Investors also need to consider risk relative to broad benchmarks, as income is only one part of the bond picture. This fund has a beta of 1.2, meaning that it is more volatile than a broad market index of fixed income securities. Taking this into account, ACTHX has a positive alpha of 1.97, 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, ACTHX has 26.7% in medium quality bonds, with ratings of 'A' to 'BBB'. The fund's junk bond component-bonds rated 'BB' or below-is at 24.03%, giving ACTHX an average quality of BBB. This means that it focuses on medium quality securities.

However, it is worth noting that 37 % of the bonds in this fund are not ranked, so take the average quality level with a bit of caution.

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, ACTHX is a load fund. It has an expense ratio of 0.85% compared to the category average of 1.89%. From a cost perspective, ACTHX is actually cheaper than its peers.

While the minimum initial investment for the product is $1,000, investors should also note that each subsequent investment needs to be at least $50.

Bottom Line

Overall, Invesco High Yield Municipals A ( ACTHX ) has a low Zacks Mutual Fund rank, strong performance, worse downside risk, and lower fees compared to its peers.

Want even more information about ACTHX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.


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