Is WMFAX a Strong Bond Fund Right Now?
If you're looking for a Muni - Bonds fund category, then a potential option is Allspring Municipal Bond A (WMFAX). WMFAX bears a Zacks Mutual Fund Rank of 3 (Hold), which is based on various forecasting factors like size, cost, and past performance.
Objective
WMFAX 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
WMFAX finds itself in the Allspring family, based out of San Francisco, CA. Allspring Municipal Bond A made its debut in April of 2005, and since then, WMFAX has accumulated about $614.39 million in assets, per the most up-to-date date available. A team of investment professionals is the fund's current manager.
Performance
Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of 0.63%, and it sits in the middle 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 3.24%, 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. The standard deviation of WMFAX over the past three years is 4.95% compared to the category average of 9.97%. The standard deviation of the fund over the past 5 years is 5.49% compared to the category average of 11.58%. 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, and is a metric that's a good way to judge how fixed income securities will respond in a shifting rate environment.
For investors who think interest rates will rise, this is an important factor to consider. WMFAX has a modified duration of 6.33, which suggests that the fund will decline 6.33% for every hundred-basis-point increase in interest rates.
Income
It is important to consider the fund's average coupon because income is often a big reason for purchasing a fixed income security. This metric calculates the fund's average payout in a given year. For example, this fund's average coupon of 4.63% means that a $10,000 investment should result in a yearly payout of $463.
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.
WMFAX carries a beta of 0.63, 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 -0.72, 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, WMFAX has 52.78% in high quality bonds rated at least "AA" or higher, while 41.94% 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
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, WMFAX is a load fund. It has an expense ratio of 0.74% compared to the category average of 0.86%. From a cost perspective, WMFAX is actually cheaper than its peers.
Investors need to be aware that with this product, the minimum initial investment is $1,000; each subsequent investment needs to be at least $100.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
Overall, Allspring Municipal Bond A ( WMFAX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, better downside risk, and lower fees, Allspring Municipal Bond A ( WMFAX ) looks like a somewhat average choice for investors right now.
Don't stop here for your research on Muni - 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 WMFAX 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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