Is LHYAX a Strong Bond Fund Right Now?

If you've been stuck searching for High Yield - Bonds funds, you might want to consider passing on by Lord Abbett High Yield A (LHYAX) as a possibility. LHYAX possesses a Zacks Mutual Fund Rank of 4 (Sell), which is based on various forecasting factors like size, cost, and past performance.

Objective

LHYAX 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

Lord Abbett is based in Jersey City, NJ, and is the manager of LHYAX. Lord Abbett High Yield A debuted in December of 1998. Since then, LHYAX has accumulated assets of about $714.22 million, according to the most recently available information. The fund is currently managed by a team of investment professionals.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund in particular has delivered a 5-year annualized total return of 3.62%, and it sits in the bottom 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 8.19%, which places it in the bottom 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. The standard deviation of LHYAX over the past three years is 5.02% compared to the category average of 10.47%. The fund's standard deviation over the past 5 years is 6.86% compared to the category average of 11.94%. 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, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at.

For those that believe interest rates will rise, this is an important factor to consider. LHYAX has a modified duration of 3.06, which suggests that the fund will decline 3.06% 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 6.64% means that a $10,000 investment should result in a yearly payout of $664.

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.

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, LHYAX is a load fund and it has an expense ratio of 0.93%.

This fund requires a minimum initial investment of $1,500, 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

As a mutual fund with a 'sell' rank, LHYAX is in the bottom 40% of all funds we cover and it may be one to avoid putting on your short list of possible picks in High Yield - Bonds. This fund from Lord Abbett needs to turn around some of its key fundamental metrics such as the Zacks Ranks of its holdings, alpha, and performance in order for investors to consider Lord Abbett High Yield A in the future.

Don't stop here for your research on High Yield - Bonds funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare LHYAX to its peers as well 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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