Is LDLFX a Strong Bond Fund Right Now?
On the lookout for a Government Bond - Short fund? Starting with Lord Abbett Short Duration Income F (LDLFX) is one possibility. LDLFX holds a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.
Objective
We note that LDLFX is a Government Bond - Short option, and this area is loaded with many different choices. Have securities issued by the United States' federal government in their portfolios. Generally, these are seen as extremely low risk from a default perspective and often regarded as risk-free. Government Bond - Short funds focus on the short end of the curve, which results in lower yields, but less sensitivity to interest rate fluctuations.
History of Fund/Manager
LDLFX is a part of the Lord Abbett family of funds, a company based out of Jersey City, NJ. The Lord Abbett Short Duration Income F made its debut in September of 2007 and LDLFX has managed to accumulate roughly $917.70 million in assets, as of the most recently available information. The fund is currently managed by a team of investment professionals.
Performance
Of course, investors look for strong performance in funds. LDLFX has a 5-year annualized total return of 2.62%, and is 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 5.74%, 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. LDLFX's standard deviation over the past three years is 1.85% compared to the category average of 10.91%. The standard deviation of the fund over the past 5 years is 2.15% compared to the category average of 12.12%. 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. LDLFX has a modified duration of 2, which suggests that the fund will decline 2% 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. This metric calculates the fund's average payout in a given year. For example, this fund's average coupon of 4.81% means that a $10,000 investment should result in a yearly payout of $481.
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. Income is only one part of the bond picture, investors also need to consider risk relative to broad benchmarks.
With a beta of 0.27, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, LDLFX has a positive alpha of 0.47 , 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, LDLFX has 31.02% in high quality bonds rated at least "AA" or higher, while 49.84% are of medium quality, with ratings of "A" to "BBB". The fund has an average quality of A, 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, LDLFX is a no load fund. It has an expense ratio of 0.49% compared to the category average of 0.91%. Looking at the fund from a cost perspective, LDLFX is actually cheaper than its peers.
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, Lord Abbett Short Duration Income F ( LDLFX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, better downside risk, and lower fees, this fund looks like a good potential choice for investors right now.
Want even more information about LDLFX? 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. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.
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This article originally published on Zacks Investment Research (zacks.com).
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