If you have been looking for Diversified Bonds fund category, a potential starting could be Metropolitan West Total Retail Bond M (MWTRX). MWTRX has a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.
We classify MWTRX in the Diversified Bonds category, an area that is rife with potential choices. Diversified Bonds funds offer exposure to a wide variety of fixed income types, stretching across various issuers, credit levels, and maturities. Generally speaking, bond funds here will have sizable exposure to government debt, as well as modest holdings in the corporate bond market too.
History of Fund/Manager
Metropolitan is based in Los Angeles, CA, and is the manager of MWTRX. Since Metropolitan West Total Retail Bond M made its debut in April of 1997, MWTRX has garnered more than $10.25 billion in assets. The fund's current manager is a team of investment professionals.
Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 2.36%, and is in the middle third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 1.93%, which places it in the bottom 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 7.41%, the standard deviation of MWTRX over the past three years is 2.75%. Looking at the past 5 years, the fund's standard deviation is 2.57% compared to the category average of 7.74%. This makes the fund less volatile than its peers over the past half-decade.
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.
For those that believe interest rates will rise, this is an important factor to consider. MWTRX has a modified duration of 6.13, which suggests that the fund will decline 6.13% for every hundred-basis-point increase in interest rates.
It is important to consider the fund's average coupon because income is often a big reason for purchasing a fixed income security. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 3.46% means that a $10,000 investment should result in a yearly payout of $346.
A higher coupon is good for those seeking a strong level of current income, but it could also pose a reinvestment risk 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. With a beta of 0.93, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, MWTRX has a negative alpha of -0.03, which measures performance on a risk-adjusted basis.
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, MWTRX has 63.05% in high quality bonds rated at least 'AA' or higher, while 30.6% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of AA, and focuses on high quality securities.
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, MWTRX is a no load fund. It has an expense ratio of 0.68% compared to the category average of 0.90%. From a cost perspective, MWTRX is actually cheaper than its peers.
Investors should also note that the minimum initial investment for the product is $5,000 and that each subsequent investment has no minimum amount.
Overall, Metropolitan West Total Retail Bond M ( MWTRX ) has a neutral Zacks Mutual Fund rank, similar performance, better downside risk, and lower fees compared to its peers.
This could just be the start of your research on MWTRXin the Diversified Bonds 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. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.
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