Is FRFZX a Strong Bond Fund Right Now?
High Yield - Bonds fund seekers should consider taking a look at PGIM Floating Rate Income Z (FRFZX). FRFZX possesses a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.
Objective
FRFZX is part of the High Yield - Bonds section, which is a segment that boasts many possible options. Often referred to as "junk" bonds,High Yield - Bonds funds sit below investment grade, meaning they are at a high default risk compared to their investment grade peers. However, one advantage to junk bonds is that they generally pay out higher yields while posing similar interest rate risks to their investment grade counterparts.
History of Fund/Manager
PGIM is based in Providence, RI, and is the manager of FRFZX. PGIM Floating Rate Income Z made its debut in March of 2011, and since then, FRFZX has accumulated about $1.53 billion in assets, per the most up-to-date date available. The fund is currently managed by a team of investment professionals.
Performance
Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 5.61%, and it sits in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 8.53%, 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. Over the past three years, FRFZX's standard deviation comes in at 2.79%, compared to the category average of 8.71%. The standard deviation of the fund over the past 5 years is 3.79% compared to the category average of 10.34%. This makes the fund less volatile than its peers over the past half-decade.
FRFZX carries a beta of 0.16, 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 2.25, 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, FRFZX's junk bond component-bonds rated "BB" or below-is at 64.79%. This means that the fund has an average quality of BBB, and focuses on medium 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, FRFZX is a no load fund. It has an expense ratio of 0.77% compared to the category average of 0.96%. From a cost perspective, FRFZX is actually cheaper than its peers.
While the minimum initial investment for the product is $0, 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, PGIM Floating Rate Income Z ( FRFZX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, better downside risk, and lower fees, PGIM Floating Rate Income Z ( FRFZX ) 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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This article originally published on Zacks Investment Research (zacks.com).
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