Is MMHYX a Strong Bond Fund Right Now?

Muni - Bonds fund seekers should consider taking a look at MFS Municipals High Income Fund A (MMHYX). MMHYX carries a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

Zacks categorizes MMHYX as Muni - Bonds, which is a segment packed with options. Muni - Bonds funds invest in debt securities issued by states or local municipalities. These are generally used to finance construction of infrastructure, pay for schools, or other government functions. Some are backed by taxes (revenue bonds), while others are " general obligation " and may not be backed by a defined source. Investors usually appreciate the tax benefits that come with many municipal bonds, which are especially impressive for those in high tax brackets.

History of Fund/Manager

MMHYX is a part of the MFS family of funds, a company based out of Boston, MA. MFS Municipals High Income Fund A made its debut in February of 1984, and since then, MMHYX has accumulated about $1.75 billion in assets, per the most up-to-date date available. The fund's current manager is a team of investment professionals.

Performance

Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of 2.13%, 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 1.87%, 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. The standard deviation of MMHYX over the past three years is 8.8% compared to the category average of 12.7%. The standard deviation of the fund over the past 5 years is 7.75% compared to the category average of 12.29%. This makes the fund less volatile than its peers over the past half-decade.

This fund has a beta of 0.9, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, MMHYX has a positive alpha of 2.13, 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, MMHYX has 34.4% in medium quality bonds, with ratings of 'A' to 'BBB'. The fund's junk bond component-bonds rated 'BB' or below-is at 17.42%, giving MMHYX an average quality of BBB. This means that it focuses on medium quality securities.

However, it is worth noting that 37 % of the bonds in this fund are not ranked, so take the average quality level with a bit of caution.

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, MMHYX is a load fund. It has an expense ratio of 0.86% compared to the category average of 0.92%. So, MMHYX is actually cheaper than its peers from a cost perspective.

This fund requires a minimum initial investment of $1,000, and each subsequent investment should be at least $50.

Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.

Bottom Line

Overall, MFS Municipals High Income Fund A ( MMHYX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the Muni - Bonds, make sure to go to www.zacks.com/funds/mutual-funds 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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