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Is DINAX a Strong Bond Fund Right Now?

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Having trouble finding a Diversified Bonds fund? Morgan Stanley Global Fixed Income Opportunity A (DINAX - Free Report) is a potential starting point. DINAX bears a Zacks Mutual Fund Rank of 1 (Strong Buy), 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 DINAX. 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

DINAX finds itself in the MorgStanley family, based out of New York, NY. Since Morgan Stanley Global Fixed Income Opportunity A made its debut in August of 1997, DINAX has garnered more than $81.60 million in assets. 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 2.98%, 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 5.05%, 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. DINAX's standard deviation over the past three years is 2.2% compared to the category average of 7.7%. The standard deviation of the fund over the past 5 years is 2.81% compared to the category average of 8.04%. 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. DINAX has a modified duration of 2.66, which suggests that the fund will decline 2.66% 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. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 4.06% means that a $10,000 investment should result in a yearly payout of $406.

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. With a beta of 0.26, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, DINAX has a positive alpha of 1.63, 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, DINAX has 35.76% in medium quality bonds, with ratings of 'A' to 'BBB'. The fund's junk bond component-bonds rated 'BB' or below-is at 35.4%, giving DINAX an average quality of BBB. This means that it focuses on medium quality securities.

However, it is worth noting that 23 % of the bonds in this fund are not ranked, so take the average quality level with a bit of caution.

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, DINAX is a load fund. It has an expense ratio of 0.89% compared to the category average of 0.90%. From a cost perspective, DINAX is actually cheaper than its peers.

This fund requires a minimum initial investment of $1,000, and each subsequent investment should be at least $100.

Bottom Line

Overall, Morgan Stanley Global Fixed Income Opportunity A ( DINAX ) has a high Zacks Mutual Fund rank, strong performance, better downside risk, and lower fees compared to its peers.

For additional information on this product, or to compare it to other mutual funds in the Diversified 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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