Is LUBIX a Strong Bond Fund Right Now?
Investment Grade Bond - Intermediate fund seekers should consider taking a look at Thrivent Income Fund A (LUBIX). LUBIX 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 LUBIX is a Investment Grade Bond - Intermediate option, which is a segment loaded with many different investment options. By targeting bonds that mature in more than three years but less than 15 years, Investment Grade Bond - Intermediate funds are a middle of the curve option. Fixed income instruments at this maturity level usually have medium duration risk, but their yields are respectable, especially in comparison to their short-maturity counterparts. Additionally, a focus on investment grade makes these funds safer, but yields tend to be lower than in the junk bond category.
History of Fund/Manager
Thrivent is responsible for LUBIX, and the company is based out of Appleton, WI. Since Thrivent Income Fund A made its debut in June of 1972, LUBIX has garnered more than $217.72 million in assets. Kent White is the fund's current manager and has held that role since June of 2017.
Performance
Investors naturally seek funds with strong performance. This fund in particular has delivered a 5-year annualized total return of 0.38%, and it sits in the middle 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 5.38%, 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. Over the past three years, LUBIX's standard deviation comes in at 6.33%, compared to the category average of 8.37%. The standard deviation of the fund over the past 5 years is 7.59% compared to the category average of 9.9%. 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. LUBIX has a modified duration of 6.4, which suggests that the fund will decline 6.4% 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 5.14% means that a $10,000 investment should result in a yearly payout of $514.
A higher coupon is good for those seeking a strong level of current income, but it could also pose a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond. Since income is just one part of the bond picture, investors need to consider risk relative to broad benchmarks.
With a beta of 0.99, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, LUBIX has a positive alpha of 0.94 , 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, LUBIX has 79.5% in medium quality bonds, with ratings of "A" to "BBB". The fund's junk bond component-bonds rated "BB" or below-is at 7.9%, giving LUBIX an average quality of BBB. This means that it focuses on medium 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, LUBIX is a load fund. It has an expense ratio of 0.75% compared to the category average of 0.73%. Looking at the fund from a cost perspective, LUBIX is actually more expensive than its peers.
This fund requires a minimum initial investment of $2,000, and each subsequent investment should be at least $50.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
Overall, Thrivent Income Fund A ( LUBIX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and higher fees, this fund looks like a good potential choice for investors right now.
This could just be the start of your research on LUBIX in the Investment Grade Bond - Intermediate 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. 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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