Is AIANX a Strong Bond Fund Right Now?

Any investors hoping to find a Government - Bonds: Misc fund could think about starting with American Century Inflation Adjustable Bond Institutional (AIANX). AIANX holds a Zacks Mutual Fund Rank of 3 (Hold), which is based on various forecasting factors like size, cost, and past performance.

Objective

AIANX is one of many Government - Bonds: Misc funds to choose from. In their portfolios, Government - Bonds: Misc funds hold securities issued by the United States' federal government, which are often seen as risk-free assets and described as extremely low-risk from a default perspective. While a mixed approach usually results in a medium yield and risk profile, this fund category focuses across the curve, meaning the yields and interest rate sensitivity will vary.

History of Fund/Manager

American Century is based in Kansas City, MO, and is the manager of AIANX. American Century Inflation Adjustable Bond Institutional made its debut in January of 2003, and since then, AIANX has accumulated about $88.12 million in assets, per the most up-to-date date available. 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 2.57%, 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 2.08%, 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 13.07%, the standard deviation of AIANX over the past three years is 7.02%. Looking at the past 5 years, the fund's standard deviation is 6.62% compared to the category average of 12.62%. 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 investors who think interest rates will rise, this is an important factor to consider. AIANX has a modified duration of 6.61, which suggests that the fund will decline 6.61% 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 1.73% means that a $10,000 investment should result in a yearly payout of $173.

A higher coupon is good for those seeking a strong level of current income, but it could also 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. AIANX carries a beta of 0.7, meaning that the fund is less volatile than a broad market index of fixed income securities. With this in mind, it has a positive alpha of 2.9, 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, AIANX has 96.44% in high quality bonds rated at least 'AA' or higher. The fund has an average quality of AAA, 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, AIANX is a no load fund. It has an expense ratio of 0.34% compared to the category average of 0.91%. So, AIANX is actually cheaper than its peers from a cost perspective.

This fund requires a minimum initial investment of $0, while there is no minimum for each subsequent investment.

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

Bottom Line

Overall, American Century Inflation Adjustable Bond Institutional ( AIANX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, better downside risk, and lower fees, American Century Inflation Adjustable Bond Institutional ( AIANX ) looks like a somewhat average choice for investors right now.

Your research on the Government - Bonds: Misc segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.

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