Is STYAX a Strong Bond Fund Right Now?
Government Mortgage - Intermediate fund seekers should consider taking a look at Wells Fargo Core Plus Bond A (STYAX). STYAX has a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
STYAX is one of many Government Mortgage - Intermediate funds to choose from. Government Mortgage - Intermediate funds focus on the mortgage-backed securities (MBS) market. This market takes mortgages, packages them together, and sells off the pooled securities to investors. This particular category focuses on MBS that usually have at least three years to maturity, but less than 10, giving a medium risk and yield profile to funds here.
History of Fund/Manager
STYAX finds itself in the Wells Fargo family, based out of San Francisco, CA. Wells Fargo Core Plus Bond A made its debut in July of 1998, and since then, STYAX has accumulated about $237.76 million in assets, per the most up-to-date date available. The fund's current manager is a team of investment professionals.
Performance
Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 3.53%, and is in the top 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 3.82%, 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 7.3%, the standard deviation of STYAX over the past three years is 3.05%. The fund's standard deviation over the past 5 years is 3.12% compared to the category average of 7.55%. 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 investors who think interest rates will rise, this is an important factor to consider. STYAX has a modified duration of 5.33, which suggests that the fund will decline 5.33% for every hundred-basis-point increase in interest rates.
Income
It is important to consider the fund's average coupon because income is often a big reason for purchasing a fixed income security. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 3.55% means that a $10,000 investment should result in a yearly payout of $355.
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. With a beta of 0.9, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, STYAX has a positive alpha of 0.89, 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, STYAX has 56.07% in high quality bonds rated at least 'AA' or higher, while 31.69% 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
As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, STYAX is a load fund. It has an expense ratio of 0.93% compared to the category average of 0.84%. From a cost perspective, STYAX is actually more expensive than its peers.
While the minimum initial investment for the product is $1,000, investors should also note that each subsequent investment needs to be at least $100.
Bottom Line
Overall, Wells Fargo Core Plus Bond A ( STYAX ) has a high Zacks Mutual Fund rank, strong performance, average downside risk, and higher fees compared to its peers.
For additional information on the Government Mortgage - Intermediate 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 STYAX too 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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