Is BHYSX a Strong Bond Fund Right Now?

If you've been stuck searching for High Yield - Bonds funds, consider BlackRock High Yield Bond Services (BHYSX) as a possibility. BHYSX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

BHYSX is classified in the High Yield - Bonds segment by Zacks, an area full of investment possibilities. High Yield - Bonds funds come in below investment grade, and are referred to as "junk" bonds for this reason. Compared to their investment grade peers, these funds are at a higher default risk, but typically pay out higher yields while posing similar interest rate risks.

History of Fund/Manager

BlackRock is responsible for BHYSX, and the company is based out of New York, NY. Since BlackRock High Yield Bond Services made its debut in November of 1998, BHYSX has garnered more than $74.54 million in assets. Mitchell Garfin is the fund's current manager and has held that role since December of 2009.

Performance

Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 4.54%, 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 8.83%, which places it in the top 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 9.75%, the standard deviation of BHYSX over the past three years is 4.35%. The standard deviation of the fund over the past 5 years is 6.73% compared to the category average of 11.59%. 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.

If you believe interest rates will rise, this is an important factor to look at. BHYSX has a modified duration of 2.82, which suggests that the fund will decline 2.82% for every hundred-basis-point increase in interest rates.

Income

We must remember to consider the fund's average coupon, as income is traditionally a big reason for purchasing a fixed income security. This metric takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 7.06% means that a $10,000 investment should result in a yearly payout of $706.

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. Investors also need to consider risk relative to broad benchmarks, as income is only one part of the bond picture.

Expenses

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, BHYSX is a no load fund. It has an expense ratio of 0.90% compared to the category average of 0.92%. From a cost perspective, BHYSX is actually cheaper than its peers.

While the minimum initial investment for the product is $5,000, investors should also note that there is no minimum for each subsequent investment.

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

Bottom Line

Overall, BlackRock High Yield Bond Services ( BHYSX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, BlackRock High Yield Bond Services ( BHYSX ) looks like a good potential choice for investors right now.

Your research on the High Yield - 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. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.

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