Is FATRX a Strong Bond Fund Right Now?
If you have been looking for Investment Grade Bond - Intermediate fund category, a potential starting could be Frost Total Return Bond Investor (FATRX). FATRX has a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.
Objective
We note that FATRX 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
FATRX finds itself in the Frost Funds family, based out of San Antonio, Tx. Frost Total Return Bond Investor made its debut in July of 2008, and since then, FATRX has accumulated about $502.99 million in assets, per the most up-to-date date available. Jeffery Elswick is the fund's current manager and has held that role since July of 2008.
Performance
Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 2.88%, and is 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 3.48%, 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 FATRX over the past three years is 1.56% compared to the category average of 6.35%. Over the past 5 years, the standard deviation of the fund is 1.89% compared to the category average of 6.77%. This makes the fund less volatile than its peers over the past half-decade.
Bond Duration
Modified duration is a measure of a specific bond's interest rate sensitivity, and is an excellent way to judge how fixed income securities will respond to a shifting rate environment.
For those that believe interest rates will rise, this is an important factor to consider. FATRX has a modified duration of 3.15, which suggests that the fund will decline 3.15% for every hundred-basis-point increase in interest rates.
Income
Since income is, of course, a big reason for purchasing a fixed income security, it is always important to consider the fund's average coupon. This metric takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 4.1% means that a $10,000 investment should result in a yearly payout of $410.
For those seeking a strong level of current income, a higher coupon is typically good news. However, it could pose 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. FATRX carries a beta of 0.45, 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 1.03, 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, FATRX has 61.51% in high quality bonds rated at least 'AA' or higher, while 20.62% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of AA, and focuses on high quality securities.
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, FATRX is a no load fund. It has an expense ratio of 0.72% compared to the category average of 0.95%. From a cost perspective, FATRX is actually cheaper than its peers.
This fund requires a minimum initial investment of $2,500, and each subsequent investment should be at least $500.
Bottom Line
Overall, Frost Total Return Bond Investor ( FATRX ) has a neutral Zacks Mutual Fund rank, strong performance, average downside risk, and lower fees compared to its peers.
This could just be the start of your research on FATRXin the Investment Grade Bond - Intermediate 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. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.
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