Is FRFZX a Strong Bond Fund Right Now?
If you have been looking for High Yield - Bonds funds, a place to start could be PGIM Floating Rate Income Z (FRFZX). FRFZX has a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.
Objective
FRFZX is part of the High Yield - Bonds section, which is a segment that boasts many possible options. Often referred to as "junk" bonds,High Yield - Bonds funds sit below investment grade, meaning they are at a high default risk compared to their investment grade peers. However, one advantage to junk bonds is that they generally pay out higher yields while posing similar interest rate risks to their investment grade counterparts.
History of Fund/Manager
FRFZX is a part of the PGIM family of funds, a company based out of Providence, RI. Since PGIM Floating Rate Income Z made its debut in March of 2011, FRFZX has garnered more than $1.90 billion in assets. A team of investment professionals is the fund's current manager.
Performance
Investors naturally seek funds with strong performance. FRFZX has a 5-year annualized total return of 6.29%, 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 9.37%, 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. Compared to the category average of 9.3%, the standard deviation of FRFZX over the past three years is 2.9%. The fund's standard deviation over the past 5 years is 3.8% compared to the category average of 10.75%. 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. FRFZX has a modified duration of .1, which suggests that the fund will decline 0.1% for every hundred-basis-point increase in interest rates.
FRFZX carries a beta of -0.18, 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 3.78, 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, FRFZX has 21.7% in high quality bonds rated at least "AA" or higher, while its junk bond component-bonds rated "BB" or below-is at 64.9%. This means that the fund has an average quality of BBB, and 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, FRFZX is a no load fund. It has an expense ratio of 0.82% compared to the category average of 0.97%. So, FRFZX is actually cheaper than its peers from a cost perspective.
While the minimum initial investment for the product is $0, investors should also note that there is no minimum for each subsequent investment.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
Overall, PGIM Floating Rate Income Z ( FRFZX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, better downside risk, and lower fees, PGIM Floating Rate Income Z ( FRFZX ) looks like a good potential choice for investors right now.
This could just be the start of your research on FRFZX in the High Yield - 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. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.
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This article originally published on Zacks Investment Research (zacks.com).
Source Zacks-com
