Is ORNAX a Strong Bond Fund Right Now?

If investors are looking at the Muni - Bonds fund category, make sure to pass over Invesco Rochester Muni Opps A (ORNAX). ORNAX carries a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on various forecasting factors like size, cost, and past performance.

Objective

ORNAX 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

Invesco is responsible for ORNAX, and the company is based out of Kansas City, MO. Since Invesco Rochester Muni Opps A made its debut in October of 1993, ORNAX has garnered more than $3.84 billion in assets. A team of investment professionals is the fund's current manager.

Performance

Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 0.75%, 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 3.56%, which places it in the bottom 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 9.32%, the standard deviation of ORNAX over the past three years is 7.61%. The fund's standard deviation over the past 5 years is 9.12% compared to the category average of 11.16%. 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. ORNAX has a modified duration of 10.06, which suggests that the fund will decline 10.06% 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 takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 5.8% means that a $10,000 investment should result in a yearly payout of $580.

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.

This fund has a beta of 0.87, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, ORNAX has a positive 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, ORNAX has 17.3% in medium quality bonds, with ratings of "A" to "BBB". The fund has an average quality of BBB, and focuses on medium quality securities.

However, it is worth noting that 56% of the bonds in this fund are not ranked, so take the average quality level with a bit of caution.

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, ORNAX is a load fund. It has an expense ratio of 1.47% compared to the category average of 0.91%. So, ORNAX is actually more expensive than its peers from a cost perspective.

This fund requires a minimum initial investment of $1,000, and each subsequent investment should be at least $50.

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

Bottom Line

Overall, Invesco Rochester Muni Opps A ( ORNAX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and higher fees, this fund looks like a poor potential choice for investors right now.

For additional information on the Muni - Bonds area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into ORNAX too 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.

Zacks' Research Chief Names "Stock Most Likely to Double"

Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.

This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.

Free: See Our Top Stock And 4 Runners Up

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

 
Get Your Free (ORNAX): Fund Analysis Report

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

Zacks Investment Research

Source Zacks-com