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On the lookout for a Muni - Bonds fund? Starting with Wells Fargo Municipals Bond Fund A (WMFAX - Free Report) should not be a possibility at this time. WMFAX holds a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.
Objective
Zacks categorizes WMFAX 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
Wells Fargo is based in San Francisco, CA, and is the manager of WMFAX. The Wells Fargo Municipals Bond Fund A made its debut in April of 2005 and WMFAX has managed to accumulate roughly $1.20 billion in assets, as of the most recently available information. A team of investment professionals is the fund's current manager.
Performance
Investors naturally seek funds with strong performance. WMFAX has a 5-year annualized total return of 3.58% and it sits in the top third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 5.11%, 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, WMFAX's standard deviation comes in at 2.2%, compared to the category average of -6.37%. Over the past 5 years, the standard deviation of the fund is 2.85% compared to the category average of -3.21%. 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, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at.
For those that believe interest rates will rise, this is an important factor to consider. WMFAX has a modified duration of 4.77, which suggests that the fund will decline 4.77% 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. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 4.37% means that a $10,000 investment should result in a yearly payout of $437.
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.
Since income is just one part of the bond picture, investors need to consider risk relative to broad benchmarks. With a beta of 0.65, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, WMFAX has a positive alpha of 0.23, 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, WMFAX has 44.69% in high quality bonds rated at least 'AA' or higher, while 41.79% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of A, and focuses on high quality securities.
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, WMFAX is a load fund. It has an expense ratio of 0.78% compared to the category average of 0.80%. So, WMFAX is actually cheaper than its peers from a cost perspective.
Investors need to be aware that with this product, the minimum initial investment is $1,000; each subsequent investment needs to be at least $100.
Bottom Line
Overall, Wells Fargo Municipals Bond Fund A ( WMFAX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, worse downside risk, and lower fees, Wells Fargo Municipals Bond Fund A ( WMFAX ) looks like a somewhat weak choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the Muni - Bonds, make sure to go to www.zacks.com/funds/mutual-funds for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.
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Is WMFAX a Strong Bond Fund Right Now?
On the lookout for a Muni - Bonds fund? Starting with Wells Fargo Municipals Bond Fund A (WMFAX - Free Report) should not be a possibility at this time. WMFAX holds a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.
Objective
Zacks categorizes WMFAX 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
Wells Fargo is based in San Francisco, CA, and is the manager of WMFAX. The Wells Fargo Municipals Bond Fund A made its debut in April of 2005 and WMFAX has managed to accumulate roughly $1.20 billion in assets, as of the most recently available information. A team of investment professionals is the fund's current manager.
Performance
Investors naturally seek funds with strong performance. WMFAX has a 5-year annualized total return of 3.58% and it sits in the top third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 5.11%, 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, WMFAX's standard deviation comes in at 2.2%, compared to the category average of -6.37%. Over the past 5 years, the standard deviation of the fund is 2.85% compared to the category average of -3.21%. 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, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at.
For those that believe interest rates will rise, this is an important factor to consider. WMFAX has a modified duration of 4.77, which suggests that the fund will decline 4.77% 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. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 4.37% means that a $10,000 investment should result in a yearly payout of $437.
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.
Since income is just one part of the bond picture, investors need to consider risk relative to broad benchmarks. With a beta of 0.65, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, WMFAX has a positive alpha of 0.23, 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, WMFAX has 44.69% in high quality bonds rated at least 'AA' or higher, while 41.79% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of A, and focuses on high quality securities.
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, WMFAX is a load fund. It has an expense ratio of 0.78% compared to the category average of 0.80%. So, WMFAX is actually cheaper than its peers from a cost perspective.
Investors need to be aware that with this product, the minimum initial investment is $1,000; each subsequent investment needs to be at least $100.
Bottom Line
Overall, Wells Fargo Municipals Bond Fund A ( WMFAX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, worse downside risk, and lower fees, Wells Fargo Municipals Bond Fund A ( WMFAX ) looks like a somewhat weak choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the Muni - Bonds, make sure to go to www.zacks.com/funds/mutual-funds for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.