Is MWTSX a Strong Bond Fund Right Now?
There are plenty of choices in the Diversified Bonds category, but where should you start your research? Well, one fund that may not be worth investigating is Metropolitan West Total Retail Bond Plan (MWTSX). MWTSX has a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on various forecasting factors like size, cost, and past performance.
Objective
The world of Diversified Bonds funds is an area filled with options, such as MWTSX. Investors looking for exposure to a variety of fixed income types that stretch across issuers, maturities, and credit levels will find a good fit with Diversified Bonds funds. Typically, these funds have a solid amount of exposure to government debt, as well as modest holdings in the corporate bond market.
History of Fund/Manager
TCW is based in Los Angeles, CA, and is the manager of MWTSX. The Metropolitan West Total Retail Bond Plan made its debut in August of 2011 and MWTSX has managed to accumulate roughly $8.89 billion 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. MWTSX has a 5-year annualized total return of -0.51%, 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 4.97%, 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 MWTSX over the past three years is 7% compared to the category average of 10.09%. The standard deviation of the fund over the past 5 years is 7.05% compared to the category average of 11.3%. 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. MWTSX has a modified duration of 6.73, which suggests that the fund will decline 6.73% for every hundred-basis-point increase in interest rates.
With a beta of 1.14, this fund is more volatile than a broad market index of fixed income securities. Taking this into account, MWTSX has a positive alpha of 0.3 , 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, MWTSX has 78.21% in high quality bonds rated at least "AA" or higher. The fund has an average quality of AA, 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, MWTSX is a no load fund and it has an expense ratio of 0.38%.
This fund requires a minimum initial investment of $25.00 million, and each subsequent investment should be at least $50,000.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
With a 'strong sell' rank, Metropolitan West Total Retail Bond Plan is in the bottom 20% of all mutual funds we cover. This means that our models suggest it is one of the worst options for investors in Diversified Bonds right now, though this could change if the performance of the fund and the Zacks Ranks of the equities in MWTSX turnaround in the next data release.
This could just be the start of your research on MWTSX in the Diversified Bonds 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. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.
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This article originally published on Zacks Investment Research (zacks.com).
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