Is USHYX a Strong Bond Fund Right Now?
If investors are looking at the High Yield - Bonds fund category, Victory High Income (USHYX) could be a potential option. USHYX carries a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.
Objective
USHYX is part of the High Yield - Bonds section, which is a segment that boasts many possible options. Often referred to as "junk" bonds,High Yield - Bonds funds sit below investment grade, meaning they are at a high default risk compared to their investment grade peers. However, one advantage to junk bonds is that they generally pay out higher yields while posing similar interest rate risks to their investment grade counterparts.
History of Fund/Manager
USHYX finds itself in the Victory family, based out of Columbus, OH. The Victory High Income made its debut in August of 1999 and USHYX has managed to accumulate roughly $723.39 million in assets, as of the most recently available information. The fund's current manager is a team of investment professionals.
Performance
Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 5.45%, 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 9.72%, 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. USHYX's standard deviation over the past three years is 4.75% compared to the category average of 9.45%. The standard deviation of the fund over the past 5 years is 6.92% compared to the category average of 10.89%. 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 investors who think interest rates will rise, this is an important factor to consider. USHYX has a modified duration of 2.93, which suggests that the fund will decline 2.93% for every hundred-basis-point increase in interest rates.
Income
Income is often a big reason for purchasing a fixed income security, so it is important to consider the fund's average coupon. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 7.01% means that a $10,000 investment should result in a yearly payout of $701.
While a higher coupon is good for when you want a strong level of current income, it could present a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond. Since income is just one part of the bond picture, investors need to consider risk relative to broad benchmarks.
This fund has a beta of 0.3, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, USHYX has a positive alpha of 5.04, 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, USHYX's junk bond component-bonds rated "BB" or below-is at 82.02%. This means that the fund has an average quality of BBB, and focuses on medium 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, USHYX is a no load fund. It has an expense ratio of 0.79% compared to the category average of 0.92%. USHYX is actually cheaper than its peers when you consider factors like cost.
This fund requires a minimum initial investment of $3,000, and each subsequent investment should be at least $50.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
Overall, Victory High Income ( USHYX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, Victory High Income ( USHYX ) 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 High Yield - 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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