Is FNMIX a Strong Bond Fund Right Now?

Any investors hoping to find an International Bond - Emerging fund might consider looking past Fidelity Advisor New Markets Income (FNMIX). FNMIX holds a Zacks Mutual Fund Rank of 4 (Sell), which is based on various forecasting factors like size, cost, and past performance.

Objective

We note that FNMIX is an International Bond - Emerging option, which is loaded with different choices. International Bond - Emerging funds focus on fixed income securities from a variety of emerging international markets. Typically, investors can expect exposure to economies like China, Brazil, India, South Africa, Indonesia, and many others. These funds are appealing because of their geographic diversification, but this can also mean that currency risk is a factor.

History of Fund/Manager

FNMIX is a part of the Fidelity family of funds, a company based out of Boston, MA. The Fidelity Advisor New Markets Income made its debut in May of 1993 and FNMIX has managed to accumulate roughly $1.55 billion in assets, as of the most recently available information. The fund's current manager, Timothy Gill, has been in charge of the fund since January of 2019.

Performance

Of course, investors look for strong performance in funds. FNMIX has a 5-year annualized total return of 3.1% and is in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 9.95%, 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 13.1%, the standard deviation of FNMIX over the past three years is 9.02%. The standard deviation of the fund over the past 5 years is 9.22% compared to the category average of 12.65%. 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. FNMIX has a modified duration of 0.74, which suggests that the fund will decline 0.74% 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. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 8.52% means that a $10,000 investment should result in a yearly payout of $852.

If you are looking for a strong level of current income, a higher coupon is a good choice, though it could pose a reinvestment risk; these risks can occur if rates are lower in the future when compared to the initial purchase date of the bond.

Investors also need to consider risk relative to broad benchmarks, as income is only one part of the bond picture. FNMIX carries a beta of 0.48, 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 4.39, 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, FNMIX has 24.49% in medium quality bonds, with ratings of 'A' to 'BBB'. The fund's junk bond component-bonds rated 'BB' or below-is at 54.72%, giving FNMIX an average quality of BBB. This means that it focuses on medium quality securities.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, FNMIX is a no load fund. It has an expense ratio of 0.77% compared to the category average of 0.94%. Looking at the fund from a cost perspective, FNMIX is actually cheaper than its peers.

Investors should also note that the minimum initial investment for the product is $0 and that each subsequent investment has no minimum amount.

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

Bottom Line

Overall, even with its comparatively similar performance, average downside risk, and lower fees, Fidelity Advisor New Markets Income ( FNMIX ) has a low Zacks Mutual Fund rank, and therefore looks a somewhat weak choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the International Bond - Emerging, make sure to go to www.zacks.com/funds/mutual-funds 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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This article originally published on Zacks Investment Research (zacks.com).

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