Is BFRAX a Strong Bond Fund Right Now?

Any investors hoping to find a Diversified Bonds fund could think about starting with BlackRock Floating Rate Income A (BFRAX). BFRAX bears a Zacks Mutual Fund Rank of 3 (Hold), which is based on various forecasting factors like size, cost, and past performance.

Objective

The world of Diversified Bonds funds is an area filled with options, such as BFRAX. 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

BlackRock is based in New York, NY, and is the manager of BFRAX. BlackRock Floating Rate Income A debuted in July of 2010. Since then, BFRAX has accumulated assets of about $271.67 million, according to the most recently available information. The fund's current manager is a team of investment professionals.

Performance

Investors naturally seek funds with strong performance. This fund in particular has delivered a 5-year annualized total return of 5.33%, and it sits 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 7.41%, which places it in the middle 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. BFRAX's standard deviation over the past three years is 2.57% compared to the category average of 8.71%. The fund's standard deviation over the past 5 years is 3.35% compared to the category average of 10.34%. 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.

For those that believe interest rates will rise, this is an important factor to consider. BFRAX has a modified duration of .03, which suggests that the fund will decline 0.03% for every hundred-basis-point increase in interest rates.

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, BFRAX is a load fund. It has an expense ratio of 0.94% compared to the category average of 0.96%. BFRAX is actually cheaper than its peers when you consider factors like cost.

While the minimum initial investment for the product is $1,000, investors should also note that each subsequent investment needs to be at least $50.

Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.

Bottom Line

Overall, BlackRock Floating Rate Income A ( BFRAX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, better downside risk, and lower fees, BlackRock Floating Rate Income A ( BFRAX ) looks like a somewhat average choice for investors right now.

Your research on the Diversified Bonds 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. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.

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