Is PTTAX a Strong Bond Fund Right Now?
Having trouble finding an Investment Grade Bond - Intermediate fund? PIMCO Total Return A (PTTAX) is a possible starting point. PTTAX bears a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.
We note that PTTAX is an Investment Grade Bond - Intermediate option, which is a segment loaded with many different investment options. By targeting bonds that mature in more than three years but less than 15 years, Investment Grade Bond - Intermediate funds are a middle of the curve option. Fixed income instruments at this maturity level usually have medium duration risk, but their yields are respectable, especially in comparison to their short-maturity counterparts. Additionally, a focus on investment grade makes these funds safer, but yields tend to be lower than in the junk bond category.
History of Fund/Manager
PTTAX is a part of the PIMCO Funds family of funds, a company based out of Newport Beach, CA. PIMCO Total Return A made its debut in May of 1987, and since then, PTTAX has accumulated about $8.17 billion in assets, per the most up-to-date date available. A team of investment professionals is the fund's current manager.
Investors naturally seek funds with strong performance. PTTAX has a 5-year annualized total return of 4.25% and is in the middle third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 4.8%, which places it in the middle 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. Over the past three years, PTTAX's standard deviation comes in at 3.41%, compared to the category average of 12.41%. Over the past 5 years, the standard deviation of the fund is 3.21% compared to the category average of 10.84%. This makes the fund less volatile than its peers over the past half-decade.
With a beta of 0.96, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, PTTAX has a positive alpha of 0.25, 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, PTTAX has 69% in high quality bonds rated at least 'AA' or higher, while 25% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of AA, and focuses on high quality securities.
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, PTTAX is a load fund. It has an expense ratio of 0.80% compared to the category average of 0.81%. PTTAX is actually cheaper than its peers when you consider factors like cost.
Investors should also note that the minimum initial investment for the product is $1,000 and that each subsequent investment needs to be at $50.
Overall, PIMCO Total Return A ( PTTAX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, better downside risk, and lower fees, this fund looks like a somewhat average choice for investors right now.
Your research on the Investment Grade Bond - Intermediate segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.