Is OIBAX a Strong Bond Fund Right Now?

Have you been searching for an International Bond - Developed fund? You might want to begin with Invesco International Bond A (OIBAX). OIBAX holds a Zacks Mutual Fund Rank of 3 (Hold), which is based on various forecasting factors like size, cost, and past performance.

Objective

OIBAX is one of many International Bond - Developed funds to choose from. International Bond - Developed funds offer investors geographic diversification by focusing on fixed income securities from developed nations besides the United States. Top holdings include assets from countries like Japan, Germany, the UK, France, and Australia. While these is certainly an advantage, investors should be aware of currency risk.

History of Fund/Manager

Invesco is based in Kansas City, MO, and is the manager of OIBAX. Invesco International Bond A debuted in June of 1995. Since then, OIBAX has accumulated assets of about $373.10 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 1.42%, and it sits 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 4.82%, which places it in the top 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, OIBAX's standard deviation comes in at 10.45%, compared to the category average of 12.81%. The standard deviation of the fund over the past 5 years is 10.05% compared to the category average of 12.43%. 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 investors who think interest rates will rise, this is an important factor to consider. OIBAX has a modified duration of 3.69, which suggests that the fund will decline 3.69% 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 takes a look at the average payout by the fund in a given year. For example, this fund's average coupon of 6.1% means that a $10,000 investment should result in a yearly payout of $610.

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.

Because income is only one part of the bond picture, investors should also consider risk relative to broad benchmarks. This fund has a beta of 0.24, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, OIBAX has a positive alpha of 3.12, 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, OIBAX has 41.58% in high quality bonds rated at least 'AA' or higher, while its junk bond component-bonds rated 'BB' or below-is at 30.11%. This means that the fund has an average quality of A, and focuses on high quality securities.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, OIBAX is a load fund. It has an expense ratio of 1.04% compared to the category average of 0.93%. OIBAX is actually more expensive than its peers when you consider factors like cost.

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, Invesco International Bond A ( OIBAX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and higher fees, this fund looks like a somewhat average choice for investors right now.

Your research on the International Bond - Developed segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.

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This article originally published on Zacks Investment Research (zacks.com).

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