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Is DLTNX a Strong Bond Fund Right Now?

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If you have been looking for Government Mortgage - Intermediate funds, it would not be wise to start your search with DoubleLine Total Return Bond N (DLTNX - Free Report) . DLTNX has a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

DLTNX is one of many Government Mortgage - Intermediate funds to choose from. Government Mortgage - Intermediate funds focus on the mortgage-backed securities (MBS) market. This market takes mortgages, packages them together, and sells off the pooled securities to investors. This particular category focuses on MBS that usually have at least three years to maturity, but less than 10, giving a medium risk and yield profile to funds here.

History of Fund/Manager

Double Line is based in Los Angeles, CA, and is the manager of DLTNX. DoubleLine Total Return Bond N debuted in April of 2010. Since then, DLTNX has accumulated assets of about $7.15 billion, according to the most recently available information. Philip A. Barach is the fund's current manager and has held that role since April of 2010.

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 3.24%, 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 3.2%, 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, DLTNX's standard deviation comes in at 2.24%, compared to the category average of 6.29%. Looking at the past 5 years, the fund's standard deviation is 2.1% compared to the category average of 6.27%. 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. DLTNX has a modified duration of 3.76, which suggests that the fund will decline 3.76% 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 3.62% means that a $10,000 investment should result in a yearly payout of $362.

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.

Income is only one part of the bond picture, investors also need to consider risk relative to broad benchmarks. DLTNX carries a beta of 0.66, 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 0.69, 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, DLTNX has 70.01% in high quality bonds rated at least 'AA' or higher. The fund has an average quality of AA, and focuses on high 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, DLTNX is a no load fund. It has an expense ratio of 0.73% compared to the category average of 0.82%. So, DLTNX is actually cheaper than its peers from a cost perspective.

While the minimum initial investment for the product is $2,000, investors should also note that each subsequent investment needs to be at least $100.

Bottom Line

Overall, DoubleLine Total Return Bond N ( DLTNX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, DoubleLine Total Return Bond N ( DLTNX ) looks like a somewhat weak choice for investors right now.

This could just be the start of your research on DLTNXin the Government Mortgage - Intermediate category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well 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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