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Is GTRAX a Strong Bond Fund Right Now?

Any investors hoping to find a Diversified Bonds fund could think about starting with Prudential Global Total Return A (GTRAX). GTRAX holds a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

The world of Diversified Bonds funds is an area filled with options, such as GTRAX. Investors looking for exposure to a variety of fixed income types that stretch across issuers, maturities, and credit levels will find a good fit with Diversified Bonds funds. Typically, these funds have a solid amount of exposure to government debt, as well as modest holdings in the corporate bond market.

History of Fund/Manager

Prudential is based in Providence, RI, and is the manager of GTRAX. Since Prudential Global Total Return A made its debut in July of 1986, GTRAX has garnered more than $182.33 million in assets. The fund is currently managed by a team of investment professionals.

Performance

Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of 2.63%, and is 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 4.34%, 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. GTRAX's standard deviation over the past three years is 6.21% compared to the category average of -10.02%. Looking at the past 5 years, the fund's standard deviation is 5.63% compared to the category average of -9.16%. 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, 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. GTRAX has a modified duration of 9.08, which suggests that the fund will decline 9.08% for every hundred-basis-point increase in interest rates.

Income

Income is often a big reason for purchasing a fixed income security, so it is important to consider the fund's average coupon. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 3.54% means that a $10,000 investment should result in a yearly payout of $354.

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.

Investors also need to consider risk relative to broad benchmarks, as income is only one part of the bond picture. GTRAX carries a beta of 1.52, meaning that the fund is more volatile than a broad market index of fixed income securities. With this in mind, it has a negative alpha of -0.31, 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, GTRAX has 35.64% in high quality bonds rated at least 'AA' or higher, while 43.24% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of A, and focuses on high 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, GTRAX is a load fund. It has an expense ratio of 0.88% compared to the category average of 0.43%. So, GTRAX is actually more expensive than its peers from a cost perspective.

While the minimum initial investment for the product is $2,500, investors should also note that each subsequent investment needs to be at least $100.

Bottom Line

Overall, Prudential Global Total Return A ( GTRAX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, worse downside risk, and higher fees, this fund looks like a somewhat average choice for investors right now.

This could just be the start of your research on GTRAXin 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. 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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