Is PIMIX a Strong Bond Fund Right Now?
Aug 15, 2019 7:00AM EDT
Any investors hoping to find a Diversified Bonds fund could think about starting with PIMCO Income Institutional (PIMIX). PIMIX has a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.
The world of Diversified Bonds funds is an area filled with options, such as PIMIX. Investors looking for exposure to a variety of fixed income types that stretch across issuers, maturities, and credit levels will find a good fit with Diversified Bonds funds. Typically, these funds have a solid amount of exposure to government debt, as well as modest holdings in the corporate bond market.
History of Fund/Manager
PIMIX finds itself in the PIMCO Funds family, based out of Newport Beach, CA. PIMCO Income Institutional made its debut in April of 2007, and since then, PIMIX has accumulated about $68.40 billion in assets, per the most up-to-date date available. A team of investment professionals is the fund's current manager.
Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 4.93%, and it sits in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 5.67%, 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. PIMIX's standard deviation over the past three years is 1.71% compared to the category average of 8.21%. Looking at the past 5 years, the fund's standard deviation is 2.3% compared to the category average of 8.4%. 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, and is a metric that's a good way to judge how fixed income securities will respond in a shifting rate environment.
If you believe interest rates will rise, this is an important factor to look at. PIMIX has a modified duration of 1.96, which suggests that the fund will decline 1.96% for every hundred-basis-point increase in interest rates.
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 calculates the fund's average payout in a given year. For example, this fund's average coupon of 3.73% means that a $10,000 investment should result in a yearly payout of $373.
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.
Income is only one part of the bond picture, investors also need to consider risk relative to broad benchmarks. This fund has a beta of 0.28, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, PIMIX has a positive alpha of 3.42, 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, PIMIX has 27.06% in high quality bonds rated at least 'AA' or higher, while 31.55% are of medium quality, with ratings of 'A' to 'BBB'. The fund's junk bond component-bonds rated 'BB' or below-is at 35.42%, giving PIMIX an average quality of BBB. This means that it focuses on medium 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, PIMIX is a no load fund. It has an expense ratio of 0.50% compared to the category average of 0.89%. So, PIMIX is actually cheaper than its peers from a cost perspective.
Investors need to be aware that with this product, the minimum initial investment is $1 million; each subsequent investment has no minimum amount.
Overall, PIMCO Income Institutional ( PIMIX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, better downside risk, and lower fees, this fund looks like a somewhat average choice for investors right now.
For additional information on the Diversified 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 PIMIX 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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