Is LBNDX a Strong Bond Fund Right Now?
Any investors hoping to find a High Yield - Bonds fund could think about starting with Lord Abbett Bond Debenture A (LBNDX). LBNDX carries a Zacks Mutual Fund Rank of 3 (Hold), which is based on various forecasting factors like size, cost, and past performance.
Objective
LBNDX is classified in the High Yield - Bonds segment by Zacks, an area full of investment possibilities. High Yield - Bonds funds come in below investment grade, and are referred to as "junk" bonds for this reason. Compared to their investment grade peers, these funds are at a higher default risk, but typically pay out higher yields while posing similar interest rate risks.
History of Fund/Manager
LBNDX is a part of the Lord Abbett family of funds, a company based out of Jersey City, NJ. Lord Abbett Bond Debenture A debuted in April of 1971. Since then, LBNDX has accumulated assets of about $4.60 billion, according to the most recently available information. A team of investment professionals is the fund's current manager.
Performance
Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 2.09%, and it sits in the bottom third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 7.64%, 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. LBNDX's standard deviation over the past three years is 4.81% compared to the category average of 10.28%. Looking at the past 5 years, the fund's standard deviation is 5.93% compared to the category average of 12.01%. 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 those that believe interest rates will rise, this is an important factor to consider. LBNDX has a modified duration of 4.42, which suggests that the fund will decline 4.42% 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. This metric takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 6.48% means that a $10,000 investment should result in a yearly payout of $648.
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. Investors also need to consider risk relative to broad benchmarks, as income is only one part of the bond picture.
With a beta of 0.5, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, LBNDX has a positive alpha of 0.97 , 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, LBNDX has 33.62% in medium quality bonds, with ratings of "A" to "BBB". The fund's junk bond component-bonds rated "BB" or below-is at 48.31%, giving LBNDX an average quality of BBB. This means that it focuses on medium 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, LBNDX is a load fund. It has an expense ratio of 0.78% compared to the category average of 0.93%. From a cost perspective, LBNDX is actually cheaper than its peers.
This fund requires a minimum initial investment of $1,000, while 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, Lord Abbett Bond Debenture A ( LBNDX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, better downside risk, and lower fees, this fund looks like a somewhat average choice for investors right now.
Want even more information about LBNDX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.
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This article originally published on Zacks Investment Research (zacks.com).
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