Is PIMIX a Strong Bond Fund Right Now?

If investors are looking at the Diversified Bonds fund category, PIMCO Income Institutional (PIMIX) could be a potential option. PIMIX carries a Zacks Mutual Fund Rank of 1 (Strong Buy), 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 PIMIX. 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

PIMIX finds itself in the PIMCO Funds family, based out of Newport Beach, CA. PIMCO Income Institutional made its debut in April of 2007, and since then, PIMIX has accumulated about $133.10 billion in assets, per the most up-to-date date available. The fund's current manager is a team of investment professionals.

Performance

Investors naturally seek funds with strong performance. PIMIX has a 5-year annualized total return of 3.79%, and is in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 8.39%, 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 PIMIX over the past three years is 4.82% compared to the category average of 10.2%. The standard deviation of the fund over the past 5 years is 5.29% compared to the category average of 11.52%. 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.

If you believe interest rates will rise, this is an important factor to look at. PIMIX has a modified duration of 5.1, which suggests that the fund will decline 5.1% 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. Average coupon is a look at the average payout by the fund in a given year. For example, this fund's average coupon of 4.98% means that a $10,000 investment should result in a yearly payout of $498.

For those seeking a strong level of current income, a higher coupon is typically good news. However, it could pose a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond. Investors also need to consider risk relative to broad benchmarks, as income is only one part of the bond picture.

With a beta of 0.59, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, PIMIX has a positive alpha of 3.29 , 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, PIMIX has 76.87% 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

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, PIMIX is a no load fund and it has an expense ratio of 0.50%.

This fund requires a minimum initial investment of $1.00 million, while 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

This puts this fund from PIMCO Funds in the top 20% of all mutual funds we have a rank on right now. As a result, this is likely an excellent choice for investors seeking an option in the Diversified Bonds category.

Want even more information about PIMIX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis 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.

Zacks' Research Chief Names "Stock Most Likely to Double"

Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.

This top pick is a little-known satellite-based communications firm. Space is projected to become a trillion dollar industry, and this company's customer base is growing fast. Analysts have forecasted a major revenue breakout in 2025. Of course, all our elite picks aren't winners but this one could far surpass earlier Zacks' Stocks Set to Double like Hims & Hers Health, which shot up +209%.

Free: See Our Top Stock And 4 Runners Up

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

 
Get Your Free (PIMIX): Fund Analysis Report

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

Zacks Investment Research

Source Zacks-com