Is GTRAX a Strong Bond Fund Right Now?
Diversified Bonds fund seekers may want to consider taking a look at PGIM Global Total Return A (GTRAX). GTRAX holds a Zacks Mutual Fund Rank of 3 (Hold), which is based on various forecasting factors like size, cost, and past performance.
Objective
We classify GTRAX in the Diversified Bonds category, an area that is rife with potential choices.Diversified Bonds funds offer exposure to a wide variety of fixed income types, stretching across various issuers, credit levels, and maturities. Generally speaking, bond funds here will have sizable exposure to government debt, as well as modest holdings in the corporate bond market too.
History of Fund/Manager
PGIM is based in Providence, RI, and is the manager of GTRAX. PGIM Global Total Return A debuted in July of 1986. Since then, GTRAX has accumulated assets of about $151.81 million, according to the most recently available information. A team of investment professionals is the fund's current manager.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund carries a 5-year annualized total return of -1.5%, and it sits in the middle 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 5.73%, 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. The standard deviation of GTRAX over the past three years is 7.03% compared to the category average of 10.16%. Over the past 5 years, the standard deviation of the fund is 8.95% compared to the category average of 11.82%. 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 those that believe interest rates will rise, this is an important factor to consider. GTRAX has a modified duration of 7.18, which suggests that the fund will decline 7.18% for every hundred-basis-point increase in interest rates.
Income
Income is often a big reason for purchasing a fixed income security, so it is 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 3.8% means that a $10,000 investment should result in a yearly payout of $380.
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.
GTRAX carries a beta of 0.77, meaning that the fund is less volatile than a broad market index of fixed income securities. With this in mind, it has a negative alpha of -0.51, 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, GTRAX has 32.85% in high quality bonds rated at least "AA" or higher, while 57.15% are of medium quality, with ratings of "A" to "BBB". The fund has an average quality of A, and focuses on high quality securities.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, GTRAX is a load fund. It has an expense ratio of 0.88% compared to the category average of 0.91%. From a cost perspective, GTRAX is actually cheaper than its peers.
Investors should also note that the minimum initial investment for the product is $1,000 and that each subsequent investment needs to be at $100.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
Overall, PGIM Global Total Return A ( GTRAX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, PGIM Global Total Return A ( GTRAX ) looks like a somewhat average choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the Diversified Bonds, make sure to go to www.zacks.com/funds/mutual-funds 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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