Is FATRX a Strong Bond Fund Right Now?

If investors are looking at the Investment Grade - Bonds: Misc fund category, Frost Total Return Bond Investor (FATRX) could be a potential option. FATRX holds a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

Zacks categorizes FATRX as Investment Grade - Bonds: Misc, which is an investment category packed with options. Investment Grade - Bonds: Misc funds do not focus on any one part of the curve, and can hold a variety of investment grade credit levels too. Duration risk will depend on a given fund's profile, and funds in this category may not be directly comparable. Lastly, the focus on investment grade will make funds here safer, but yields will be lower than in the junk bond category.

History of Fund/Manager

Frost Funds is responsible for FATRX, and the company is based out of San Antonio, Tx. Frost Total Return Bond Investor debuted in July of 2008. Since then, FATRX has accumulated assets of about $222.06 million, according to the most recently available information. Jeffery Elswick is the fund's current manager and has held that role since July of 2008.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 4.11%, and it sits in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 4.79%, which places it in the top 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. FATRX's standard deviation over the past three years is 4.81% compared to the category average of 10.09%. The fund's standard deviation over the past 5 years is 4.16% compared to the category average of 9.83%. 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.

If you believe interest rates will rise, this is an important factor to look at. FATRX has a modified duration of 5.45, which suggests that the fund will decline 5.45% 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. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 5.55% means that a $10,000 investment should result in a yearly payout of $555.

For those seeking a strong level of current income, a higher coupon is typically good news. However, it could pose a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond.

Income is only one part of the bond picture, investors also need to consider risk relative to broad benchmarks. This fund has a beta of 0.6, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, FATRX has a positive alpha of 3.51, 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, FATRX has 73.26% in high quality bonds rated at least 'AA' or higher. The fund has an average quality of AA, and focuses on high quality securities.

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, FATRX is a no load fund. It has an expense ratio of 0.70% compared to the category average of 0.82%. FATRX is actually cheaper than its peers when you consider factors like cost.

This fund requires a minimum initial investment of $2,500, and each subsequent investment should be at least $500.

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

Bottom Line

Overall, Frost Total Return Bond Investor ( FATRX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, better downside risk, and lower fees, Frost Total Return Bond Investor ( FATRX ) looks like a good potential choice for investors right now.

Your research on the Investment Grade - 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. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.

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