Is PYMAX a Strong Bond Fund Right Now?

Any investors hoping to find a Muni - Bonds fund could think about starting with PIMCO High Yield Municipals Bond A (PYMAX). PYMAX has a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

PYMAX 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

PIMCO Funds is based in Newport Beach, CA, and is the manager of PYMAX. PIMCO High Yield Municipals Bond A debuted in August of 2006. Since then, PYMAX has accumulated assets of about $1.40 billion, according to the most recently available information. The fund is currently managed by David Hammer who has been in charge of the fund since August of 2015.

Performance

Investors naturally seek funds with strong performance. PYMAX has a 5-year annualized total return of 1.06%, 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 4.51%, 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. Compared to the category average of 9.94%, the standard deviation of PYMAX over the past three years is 6.45%. The fund's standard deviation over the past 5 years is 7.46% compared to the category average of 11.6%. 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. PYMAX has a modified duration of 7.63, which suggests that the fund will decline 7.63% for every hundred-basis-point increase in interest rates.

With a beta of 0.8, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, PYMAX has a positive alpha of 0.7 , 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, PYMAX has 31.1 in high quality bonds rated at least "AA" or higher, while 36.3% are of medium quality, with ratings of "A" to "BBB". The fund's junk bond component-bonds rated "BB" or below-is at 32.4%, giving PYMAX an average quality of A. This means that it focuses on high quality securities.

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, PYMAX is a load fund. It has an expense ratio of 0.85% compared to the category average of 0.91%. PYMAX 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 $1,000 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, PIMCO High Yield Municipals Bond A ( PYMAX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, PIMCO High Yield Municipals Bond A ( PYMAX ) looks like a good potential choice for investors right now.

This could just be the start of your research on PYMAX in the Muni - Bonds category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.

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