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Is CXHYX a Strong Bond Fund Right Now?

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Any investors hoping to find a Muni - Bonds fund could think about starting with Delaware National High Yield Municipals A (CXHYX). CXHYX has a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

Zacks categorizes CXHYX 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

Delaware Investments is based in Philadelphia, PA, and is the manager of CXHYX. The Delaware National High Yield Municipals A made its debut in September of 1986 and CXHYX has managed to accumulate roughly $195.94 million in assets, as of the most recently available information. 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 in particular has delivered a 5-year annualized total return of 6.01%, and it sits in the top 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 3.98%, 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. The standard deviation of CXHYX over the past three years is 4.17% compared to the category average of 5.77%. Looking at the past 5 years, the fund's standard deviation is 3.88% compared to the category average of 5.81%. This makes the fund less 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. CXHYX has a modified duration of 6.02, which suggests that the fund will decline 6.02% 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 calculates the fund's average payout in a given year. For example, this fund's average coupon of 5.75% means that a $10,000 investment should result in a yearly payout of $575.

While a higher coupon is good for when you want a strong level of current income, it could present 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. This fund has a beta of 1.17, meaning that it is more volatile than a broad market index of fixed income securities. Taking this into account, CXHYX has a positive alpha of 1.98, 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, CXHYX has 34.17% in medium quality bonds, with ratings of 'A' to 'BBB'. The fund's junk bond component-bonds rated 'BB' or below-is at 25.15%, giving CXHYX an average quality of BBB. This means that it focuses on medium quality securities.

However, it is worth noting that 33 % of the bonds in this fund are not ranked, so take the average quality level with a bit of caution.

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, CXHYX is a load fund. It has an expense ratio of 0.85% compared to the category average of 0.86%. From a cost perspective, CXHYX is actually cheaper than its peers.

While the minimum initial investment for the product is $1,000, investors should also note that each subsequent investment needs to be at least $100.

Bottom Line

Overall, Delaware National High Yield Municipals A ( CXHYX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

This could just be the start of your research on CXHYXin the Muni - 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. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.

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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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