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High Yield - Bonds fund seekers should consider taking a look at BlackRock High Yield Bond Institutional (BHYIX - Free Report) . BHYIX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
BHYIX is part of the High Yield - Bonds section, which is a segment that boasts many possible options. Often referred to as " junk " bonds, High Yield - Bonds funds sit below investment grade, meaning they are at a high default risk compared to their investment grade peers. However, one advantage to junk bonds is that they generally pay out higher yields while posing similar interest rate risks to their investment grade counterparts.
History of Fund/Manager
BHYIX finds itself in the BlackRock family, based out of New York, NY. The BlackRock High Yield Bond Institutional made its debut in November of 1998 and BHYIX has managed to accumulate roughly $11.25 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. BHYIX has a 5-year annualized total return of 5.56% 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 6.56%, 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. Compared to the category average of -27.05%, the standard deviation of BHYIX over the past three years is 4.31%. Over the past 5 years, the standard deviation of the fund is 5% compared to the category average of -24.71%. 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.
For those that believe interest rates will rise, this is an important factor to consider. BHYIX has a modified duration of 3.11, which suggests that the fund will decline 3.11% 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 6.4% means that a $10,000 investment should result in a yearly payout of $640.
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. BHYIX carries a beta of 0.26, 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 4.5, 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, BHYIX 's junk bond component-bonds rated 'BB' or below-is at 93.24%. This means that the fund has an average quality of BBB, and focuses on medium 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, BHYIX is a no load fund. It has an expense ratio of 0.60% compared to the category average of 1.11%. From a cost perspective, BHYIX is actually cheaper than its peers.
Investors need to be aware that with this product, the minimum initial investment is $2 million; each subsequent investment has no minimum amount.
Bottom Line
Overall, BlackRock High Yield Bond Institutional ( BHYIX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, worse downside risk, and lower fees, this fund looks like a good potential choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the High Yield - Bonds, make sure to go to www.zacks.com/funds/mutual-funds for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.
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Is BHYIX a Strong Bond Fund Right Now?
High Yield - Bonds fund seekers should consider taking a look at BlackRock High Yield Bond Institutional (BHYIX - Free Report) . BHYIX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
BHYIX is part of the High Yield - Bonds section, which is a segment that boasts many possible options. Often referred to as " junk " bonds, High Yield - Bonds funds sit below investment grade, meaning they are at a high default risk compared to their investment grade peers. However, one advantage to junk bonds is that they generally pay out higher yields while posing similar interest rate risks to their investment grade counterparts.
History of Fund/Manager
BHYIX finds itself in the BlackRock family, based out of New York, NY. The BlackRock High Yield Bond Institutional made its debut in November of 1998 and BHYIX has managed to accumulate roughly $11.25 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. BHYIX has a 5-year annualized total return of 5.56% 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 6.56%, 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. Compared to the category average of -27.05%, the standard deviation of BHYIX over the past three years is 4.31%. Over the past 5 years, the standard deviation of the fund is 5% compared to the category average of -24.71%. 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.
For those that believe interest rates will rise, this is an important factor to consider. BHYIX has a modified duration of 3.11, which suggests that the fund will decline 3.11% 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 6.4% means that a $10,000 investment should result in a yearly payout of $640.
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. BHYIX carries a beta of 0.26, 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 4.5, 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, BHYIX 's junk bond component-bonds rated 'BB' or below-is at 93.24%. This means that the fund has an average quality of BBB, and focuses on medium 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, BHYIX is a no load fund. It has an expense ratio of 0.60% compared to the category average of 1.11%. From a cost perspective, BHYIX is actually cheaper than its peers.
Investors need to be aware that with this product, the minimum initial investment is $2 million; each subsequent investment has no minimum amount.
Bottom Line
Overall, BlackRock High Yield Bond Institutional ( BHYIX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, worse downside risk, and lower fees, this fund looks like a good potential choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the High Yield - Bonds, make sure to go to www.zacks.com/funds/mutual-funds for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.