Is NMHYX a Strong Bond Fund Right Now?

Any investors hoping to find a High Yield - Bonds fund could think about starting with Northern Multi-Managed High Yield Opportunity (NMHYX). NMHYX bears a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

NMHYX 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

Northern is based in Chicago, IL, and is the manager of NMHYX. The Northern Multi-Managed High Yield Opportunity made its debut in October of 2009 and NMHYX has managed to accumulate roughly $144.46 million in assets, as of the most recently available information. The fund is currently managed by Neal Barrett who has been in charge of the fund since May of 2023.

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 4.34%, and it sits 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 8.26%, 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. Over the past three years, NMHYX's standard deviation comes in at 4.24%, compared to the category average of 4.04%. Over the past 5 years, the standard deviation of the fund is 6.27% compared to the category average of 6.05%. This makes the fund more 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 investors who think interest rates will rise, this is an important factor to consider. NMHYX has a modified duration of 2.64, which suggests that the fund will decline 2.64% 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. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 7.03% means that a $10,000 investment should result in a yearly payout of $703.

If you are looking for a strong level of current income, a higher coupon is a good choice, though it could pose a reinvestment risk; these risks can occur 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

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, NMHYX is a no load fund. It has an expense ratio of 0.68% compared to the category average of 0.87%. NMHYX is actually cheaper than its peers when you consider factors like cost.

Investors should also note that the minimum initial investment for the product is $2,500 and that each subsequent investment needs to be at $50.

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

Bottom Line

Overall, Northern Multi-Managed High Yield Opportunity ( NMHYX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Northern Multi-Managed High Yield Opportunity ( NMHYX ) looks like a good potential choice for investors right now.

Don't stop here for your research on High Yield - Bonds funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare NMHYX to its peers as well for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.

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This article originally published on Zacks Investment Research (zacks.com).

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