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Is BHYIX a Strong Bond Fund Right Now?

Looking for a High Yield - Bonds fund? You may want to consider BlackRock High Yield Bond Institutional (BHYIX) as a possible option. BHYIX carries a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

BHYIX is classified in the High Yield - Bonds segment by Zacks, an area full of investment possibilities. High Yield - Bonds funds come in below investment grade, and are referred to as " junk " bonds for this reason. Compared to their investment grade peers, these funds are at a higher default risk, but typically pay out higher yields while posing similar interest rate risks.

History of Fund/Manager

BHYIX finds itself in the BlackRock family, based out of New York, NY. BlackRock High Yield Bond Institutional made its debut in November of 1998, and since then, BHYIX has accumulated about $7.94 billion in assets, per the most up-to-date date available. A team of investment professionals is the fund's current manager.

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 2.14%, and is in the bottom 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 5.85%, 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 4.23%. The standard deviation of the fund over the past 5 years is 4.87% compared to the category average of -25.69%. 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.

If you believe interest rates will rise, this is an important factor to look at. BHYIX has a modified duration of 3.53, which suggests that the fund will decline 3.53% for every hundred-basis-point increase in interest rates.

Income

Since income is, of course, a big reason for purchasing a fixed income security, it is always important to consider the fund's average coupon. This metric calculates the fund's average payout in a given year. For example, this fund's average coupon of 6.49% means that a $10,000 investment should result in a yearly payout of $649.

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. This fund has a beta of 0.12, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, BHYIX has a positive alpha of 1.36, 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 90.14%. This means that the fund has an average quality of BBB, and focuses on medium quality securities.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, BHYIX is a no load fund. It has an expense ratio of 0.61% compared to the category average of 1.17%. Looking at the fund 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 neutral Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, worse downside risk, and lower fees, this fund looks like a somewhat average choice for investors right now.

Want even more information about BHYIX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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