If you've been stuck searching for High Yield - Bonds funds, you might want to consider passing on by Macquarie High Income A (WHIAX) as a possibility. WHIAX has a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on various forecasting factors like size, cost, and past performance.
Objective
WHIAX is part of the High Yield - Bonds section, which is a segment that boasts many possible options. Often referred to as "junk" bonds,High Yield - Bonds funds sit below investment grade, meaning they are at a high default risk compared to their investment grade peers. However, one advantage to junk bonds is that they generally pay out higher yields while posing similar interest rate risks to their investment grade counterparts.
History of Fund/Manager
WHIAX finds itself in the Nomura family, based out of New York, NY. Macquarie High Income A debuted in September of 2003. Since then, WHIAX has accumulated assets of about $1.10 billion, according to the most recently available information. The fund's current manager, John McCarthy, has been in charge of the fund since November of 2021.
Performance
Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 3.26%, and is in the bottom 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 8.3%, which places it in the bottom third during this time-frame.
It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.
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 10.42%, the standard deviation of WHIAX over the past three years is 5.93%. The standard deviation of the fund over the past 5 years is 7.44% compared to the category average of 12.04%. 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. WHIAX has a modified duration of 2.96, which suggests that the fund will decline 2.96% 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 7.34% means that a $10,000 investment should result in a yearly payout of $734.
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. Because income is only one part of the bond picture, investors should also consider risk relative to broad benchmarks.
WHIAX carries a beta of 0.18, meaning that the fund is less volatile than a broad market index of fixed income securities. With this in mind, it has a positive alpha of 2.69, which measures performance on a risk-adjusted basis.Expenses
For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, WHIAX is a load fund. It has an expense ratio of 1.00% compared to the category average of 0.93%. Looking at the fund from a cost perspective, WHIAX is actually more expensive than its peers.
Investors need to be aware that with this product, the minimum initial investment is $1,000; each subsequent investment needs to be at least $100.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
Overall, Macquarie High Income A ( WHIAX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, average downside risk, and higher fees, this fund looks like a somewhat weak choice for investors right now.
For additional information on the High Yield - Bonds area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into WHIAX too for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.
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