Is PDBZX a Strong Bond Fund Right Now?
If you've been stuck searching for Diversified Bonds funds, consider PGIM Total Return Bond Z (PDBZX) as a possibility. PDBZX has a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.
Objective
PDBZX is one of many Diversified Bonds funds to choose from.Diversified Bonds funds give investors exposure to a variety of fixed income types that span across different issuers, maturities, and credit levels. Usually, these funds will have a good amount of exposure to government debt, in addition to modest holdings in the corporate bond market.
History of Fund/Manager
PDBZX is a part of the PGIM family of funds, a company based out of Providence, RI. Since PGIM Total Return Bond Z made its debut in September of 1996, PDBZX has garnered more than $24.80 billion in assets. A team of investment professionals is the fund's current manager.
Performance
Investors naturally seek funds with strong performance. PDBZX has a 5-year annualized total return of 0.04%, and is 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 5.64%, 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. Compared to the category average of 10.83%, the standard deviation of PDBZX over the past three years is 6.14%. The fund's standard deviation over the past 5 years is 6.59% compared to the category average of 12.21%. 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 those that believe interest rates will rise, this is an important factor to consider. PDBZX has a modified duration of 6.01, which suggests that the fund will decline 6.01% 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. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 4.39% means that a $10,000 investment should result in a yearly payout of $439.
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. Income is only one part of the bond picture, investors also need to consider risk relative to broad benchmarks.
With a beta of 0.92, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, PDBZX has a positive alpha of 0.46 , 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, PDBZX has 65.03% in high quality bonds rated at least "AA" or higher, while 22.56% are of medium quality, with ratings of "A" to "BBB". The fund has an average quality of AA, and focuses on high quality securities.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, PDBZX is a no load fund. It has an expense ratio of 0.49% compared to the category average of 0.91%. So, PDBZX is actually cheaper than its peers from a cost perspective.
While the minimum initial investment for the product is $0, investors should also note that 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
Overall, PGIM Total Return Bond Z ( PDBZX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, better downside risk, and lower fees, PGIM Total Return Bond Z ( PDBZX ) looks like a great potential choice for investors right now.
Your research on the Diversified Bonds 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. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.
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This article originally published on Zacks Investment Research (zacks.com).
Source Zacks-com
