High Yield - Bonds fund seekers should consider taking a look at Ivy High Income A (WHIAX). WHIAX has a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
WHIAX is classified in the High Yield - Bonds segment by Zacks, an area full of investment possibilities. High Yield - Bonds funds come in below investment grade, and are referred to as " junk " bonds for this reason. Compared to their investment grade peers, these funds are at a higher default risk, but typically pay out higher yields while posing similar interest rate risks.
History of Fund/Manager
Ivy Funds is responsible for WHIAX, and the company is based out of Boca Raton, FL. Ivy High Income A debuted in September of 2003. Since then, WHIAX has accumulated assets of about $2.22 billion, according to the most recently available information. The fund's current manager, Chad A. Gunther, has been in charge of the fund since July of 2014.
Performance
Of course, investors look for strong performance in funds. WHIAX has a 5-year annualized total return of 3.54% and is 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 6.47%, which places it in the middle third during this time-frame.
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, WHIAX's standard deviation comes in at 5.57%, compared to the category average of 7.98%. Looking at the past 5 years, the fund's standard deviation is 5.3% compared to the category average of 8.11%. 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. WHIAX has a modified duration of 2.9, which suggests that the fund will decline 2.9% 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. A fund's average coupon is simply its average payout in a given year. For example, this fund's average coupon of 0.3% means that a $10,000 investment should result in a yearly payout of $30.
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.
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 0.18, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, WHIAX has a positive alpha of 2.77, which measures performance on a risk-adjusted basis.
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, WHIAX is a load fund. It has an expense ratio of 0.95% compared to the category average of 1.03%. Looking at the fund from a cost perspective, WHIAX is actually cheaper than its peers.
Investors should also note that the minimum initial investment for the product is $750 and that each subsequent investment has no minimum amount.
Bottom Line
Overall, Ivy High Income A ( WHIAX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, Ivy High Income A ( WHIAX ) looks like a great 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. 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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