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Is MEMTX a Strong Bond Fund Right Now?

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On the lookout for a Muni - Bonds fund? Starting with BlackRock Strategic Municipals Opportunities A (MEMTX - Free Report) should not be a possibility at this time. MEMTX bears a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We classify MEMTX in the Muni - Bonds category, an area rife with potential choices. Muni - Bonds funds focus their investments on debt securities issued by state and local governments. These are typically used to pay for the construction of infrastructure, the operation of public schools, and other municipal functions. These securities can come in the form of revenue bonds, which are backed by taxes, as well as " general obligation " bonds that are not backed by a defined source. Investors are usually interested that come with most municipal bonds, which can be especially important for those in higher tax brackets.

History of Fund/Manager

BlackRock is responsible for MEMTX, and the company is based out of New York, NY. Since BlackRock Strategic Municipals Opportunities A made its debut in October of 2006, MEMTX has garnered more than $1.77 billion in assets. The fund is currently managed by a team of investment professionals.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. MEMTX has a 5-year annualized total return of 3.82% and is 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 3.38%, 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. MEMTX's standard deviation over the past three years is 3.5% compared to the category average of 7.42%. The standard deviation of the fund over the past 5 years is 2.99% compared to the category average of 7.64%. This makes the fund less 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. MEMTX has a modified duration of 2.96, which suggests that the fund will decline 2.96% for every hundred-basis-point increase in interest rates.

Income

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. This metric takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 5.05% means that a $10,000 investment should result in a yearly payout of $505.

If you are looking for a strong level of current income, a higher coupon is a good choice, though it could pose a reinvestment risk; these risks can occur 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. This fund has a beta of 0.73, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, MEMTX has a positive alpha of 0.62, which measures performance on a risk-adjusted basis.

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, MEMTX is a load fund. It has an expense ratio of 0.77% compared to the category average of 0.85%. MEMTX is actually cheaper than its peers when you consider factors like cost.

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 Strategic Municipals Opportunities A ( MEMTX ) has a low Zacks Mutual Fund rank, strong performance, average downside risk, and lower fees compared to its peers.

Your research on the Muni - 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. 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.


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