Is LDLAX a Strong Bond Fund Right Now?
If investors are looking at the Government Bond - Short fund category, Lord Abbett Short Duration Income C (LDLAX) could be a potential option. LDLAX bears a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.
Objective
LDLAX is one of many Government Bond - Short funds to choose from. Often seen as risk-free assets and described as extremely low-risk from a default perspective,Government Bond - Short funds hold securities issued by the federal government of the United States. Focusing on the short end of the curve, this category can result in n lower yields, but less sensitivity to interest rate fluctuations.
History of Fund/Manager
Lord Abbett is based in Jersey City, NJ, and is the manager of LDLAX. Lord Abbett Short Duration Income C made its debut in July of 1996, and since then, LDLAX has accumulated about $1.07 billion in assets, per the most up-to-date date available. The fund's current manager is a team of investment professionals.
Performance
Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 1.8%, and is 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 4.54%, 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. LDLAX's standard deviation over the past three years is 2.38% compared to the category average of 10%. The fund's standard deviation over the past 5 years is 2.48% compared to the category average of 11.67%. 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, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at.
If you believe interest rates will rise, this is an important factor to look at. LDLAX has a modified duration of 1.97, which suggests that the fund will decline 1.97% for every hundred-basis-point increase in interest rates.
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. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 4.93% means that a $10,000 investment should result in a yearly payout of $493.
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. Because income is only one part of the bond picture, investors should also consider risk relative to broad benchmarks.
LDLAX carries a beta of 0.38, 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 -1.12, 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, LDLAX has 34.33% in high quality bonds rated at least "AA" or higher, while 48.67% 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, LDLAX is a no load fund. It has an expense ratio of 1.22% compared to the category average of 0.90%. LDLAX is actually more expensive than its peers when you consider factors like cost.
Investors should also note that the minimum initial investment for the product is $1,500 and that each subsequent investment has no minimum amount.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
Overall, Lord Abbett Short Duration Income C ( LDLAX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, better downside risk, and higher fees, Lord Abbett Short Duration Income C ( LDLAX ) looks like a good potential choice for investors right now.
Want even more information about LDLAX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis 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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