Is HICOX a Strong Bond Fund Right Now?

On the lookout for a Muni - Bonds fund? Starting with Colorado Bond Shares Tax-Exempt A (HICOX) is one possibility. HICOX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

HICOX is one of many Muni - Bonds funds to choose from. Muni - Bonds funds invest in debt securities issued by states and local municipalities, which are typically used to pay for infrastructure construction, schools, and other government functions. These securities can be backed by taxes (revenue bonds), but others are known as "general obligation" and are not necessarily backed by a defined source. These bonds are especially attractive because of their inherent tax benefits.

History of Fund/Manager

Freedom Funds is based in Denver, CO, and is the manager of HICOX. Since Colorado Bond Shares Tax-Exempt A made its debut in June of 1987, HICOX has garnered more than $1.96 billion in assets. Fred R. Kelly Jr. is the fund's current manager and has held that role since November of 1990.

Performance

Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 3.59%, 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 6.74%, 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 5.01%, the standard deviation of HICOX over the past three years is 4.15%. The standard deviation of the fund over the past 5 years is 4.89% compared to the category average of 5.48%. This makes the fund less volatile than its peers over the past half-decade.

Income

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 takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 5.76% means that a $10,000 investment should result in a yearly payout of $576.

While a higher coupon is good for when you want a strong level of current income, it could present a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond. Because income is only one part of the bond picture, investors should also consider risk relative to broad benchmarks.

However, it is worth noting that 95% of the bonds in this fund are not ranked, so take the average quality level with a bit of caution.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, HICOX is a load fund. It has an expense ratio of 0.74% compared to the category average of 0.72%. Looking at the fund from a cost perspective, HICOX is actually more expensive than its peers.

This fund requires a minimum initial investment of $500, while 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, Colorado Bond Shares Tax-Exempt A ( HICOX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and higher fees, this fund looks like a good potential choice for investors right now.

Your research on the Muni - 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. 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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