There are plenty of choices in the High Yield – Bonds category, but where should you start your research? Well, one fund that might be worth investigating is BlackRock High Yield Bond Institutional (BHYIX). BHYIX holds a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.
BHYIX 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.
BlackRock is based in New York, NY, and is the manager of BHYIX. The BlackRock High Yield Bond Institutional made its debut in November of 1998 and BHYIX has managed to accumulate roughly $12.66 billion in assets, as of the most recently available information. The fund’s current manager, Mitchell Garfin, has been in charge of the fund since December of 2009.
Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 6.41%, and is 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 10.22%, 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. The standard deviation of BHYIX over the past three years is 6.77% compared to the category average of 12.72%. The fund’s standard deviation over the past 5 years is 7.26% compared to the category average of 12.23%. This makes the fund less volatile than its peers over the past half-decade.
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 investors who think interest rates will rise, this is an important factor to consider. BHYIX 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 is often a big reason for purchasing a fixed income security, so it is 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 7.06% means that a $10,000 investment should result in a yearly payout of $706.
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 0.31, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, BHYIX has a positive alpha of 6.66, which measures performance on a risk-adjusted basis.
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, BHYIX is a no load fund. It has an expense ratio of 0.55% compared to the category average of 0.93%. Looking at the fund from a cost perspective, BHYIX is actually cheaper than its peers.
Investors need to be aware that with this product, the minimum initial investment is $2 million; each subsequent investment has no minimum amount.
Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.
Overall, BlackRock High Yield Bond Institutional ( BHYIX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, BlackRock High Yield Bond Institutional ( BHYIX ) looks like a good potential choice for investors right now.
Don’t stop here for your research on High Yield – Bonds funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare BHYIX to its peers as well 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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This article originally published on Zacks Investment Research (zacks.com).
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