There are plenty of choices in the Government - Bonds: Misc category, but where should you start your research? Well, one fund that may not be worth investigating is Lord Abbett Floating Rate A (
LFRAX Quick Quote LFRAX - Free Report) . LFRAX carries a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on nine forecasting factors like size, cost, and past performance. Objective
We classify LFRAX in the Government - Bonds: Misc category, an area rife with potential choices. Government - Bonds: Misc funds hold securities issued by the federal government of the United States of America. These are seen as extremely low risk securities from a default perspective, and are often regarded as risk-free assets. This category stretches across the curve, so the yields and interest rate sensitivity will vary, though a mixed approach generally results in a medium yield and risk profile.
History of Fund/Manager
Lord Abbett is based in Jersey City, NJ, and is the manager of LFRAX. Since Lord Abbett Floating Rate A made its debut in December of 2007, LFRAX has garnered more than $2.46 billion in assets. The fund's current manager is a team of investment professionals.
Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund in particular has delivered a 5-year annualized total return of 0.1%, and is 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 -2.56%, 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. Over the past three years, LFRAX's standard deviation comes in at 8.88%, compared to the category average of 9.32%. The fund's standard deviation over the past 5 years is 7.15% compared to the category average of 9.27%. This makes the fund less volatile than its peers over the past half-decade.
With a beta of 0.29, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, LFRAX has a negative alpha of -0.72, which measures performance on a risk-adjusted basis.
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, LFRAX is a load fund. It has an expense ratio of 0.81% compared to the category average of 0.89%. From a cost perspective, LFRAX is actually cheaper than its peers.
While the minimum initial investment for the product is $1,500, investors should also note that there is no minimum for each subsequent investment.
Overall, Lord Abbett Floating Rate A ( LFRAX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Lord Abbett Floating Rate A ( LFRAX ) looks like a somewhat weak choice for investors right now.
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