Is OSTIX a Strong Bond Fund Right Now?
On the lookout for a Diversified Bonds fund? Starting with The Osterweis Strategic Income Fund (OSTIX) should not be a possibility at this time. OSTIX carries a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on nine forecasting factors like size, cost, and past performance.
OSTIX is one of many Diversified Bonds funds to choose from. Diversified Bonds funds give investors exposure to a variety of fixed income types that span across different issuers, maturities, and credit levels. Usually, these funds will have a good amount of exposure to government debt, in addition to modest holdings in the corporate bond market.
History of Fund/Manager
Osterweis is based in San Francisco, CA, and is the manager of OSTIX. The Osterweis Strategic Income Fund debuted in August of 2002. Since then, OSTIX has accumulated assets of about $5.52 billion, according to the most recently available information. A team of investment professionals is the fund's current manager.
Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund carries a 5-year annualized total return of 3.59%, and it sits in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 5.62%, 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 3.05%, the standard deviation of OSTIX over the past three years is 2.7%. Over the past 5 years, the standard deviation of the fund is 3.34% compared to the category average of 3.28%. This makes the fund more 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 investors who think interest rates will rise, this is an important factor to consider. OSTIX has a modified duration of 1.29, which suggests that the fund will decline 1.29% 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 6.33% means that a $10,000 investment should result in a yearly payout of $633.
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.
Since income is just one part of the bond picture, investors need to consider risk relative to broad benchmarks. With a beta of -0.02, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, OSTIX has a positive alpha of 2.7, which measures performance on a risk-adjusted basis.
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, OSTIX is a no load fund. It has an expense ratio of 0.84% compared to the category average of 0.89%. Looking at the fund from a cost perspective, OSTIX is actually cheaper than its peers.
This fund requires a minimum initial investment of $5,000, and each subsequent investment should be at least $100.
Overall, The Osterweis Strategic Income Fund ( OSTIX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, The Osterweis Strategic Income Fund ( OSTIX ) looks like a somewhat weak choice for investors right now.
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