Any investors hoping to find a High Yield – Bonds fund might consider looking past Macquarie High Income A (WHIAX). WHIAX has a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on various forecasting factors like size, cost, and past performance.
WHIAX 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.
Macquarie is responsible for WHIAX, and the company is based out of Philadelphia, PA. Macquarie High Income A debuted in September of 2003. Since then, WHIAX has accumulated assets of about $1.17 billion, according to the most recently available information. The fund’s current manager, John McCarthy, has been in charge of the fund since November of 2021.
Investors naturally seek funds with strong performance. WHIAX has a 5-year annualized total return of 4.79% and is in the bottom third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 4.66%, which places it in the bottom third during this time-frame.
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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 WHIAX over the past three years is 8.65% compared to the category average of 12.64%. The fund’s standard deviation over the past 5 years is 8.02% compared to the category average of 12.33%. 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.
If you believe interest rates will rise, this is an important factor to look at. WHIAX has a modified duration of 3.02, which suggests that the fund will decline 3.02% 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. This metric calculates the fund’s average payout in a given year. For example, this fund’s average coupon of 7.41% means that a $10,000 investment should result in a yearly payout of $741.
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.
Investors also need to consider risk relative to broad benchmarks, as income is only one part of the bond picture. WHIAX carries a beta of 0.03, meaning that the fund is less volatile than a broad market index of fixed income securities. With this in mind, it has a positive alpha of 5.05, which measures performance on a risk-adjusted basis.
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, WHIAX is a load fund. It has an expense ratio of 0.89% compared to the category average of 0.93%. Looking at the fund from a cost perspective, WHIAX is actually cheaper than its peers.
While the minimum initial investment for the product is $1,000, investors should also note that each subsequent investment needs to be at least $100.
Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.
Overall, even with its comparatively weak performance, average downside risk, and lower fees, Macquarie High Income A ( WHIAX ) has a low Zacks Mutual Fund rank, and therefore looks a somewhat weak 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 WHIAX to its peers as well for additional information. Zacks provides a full suite of tools to help you analyze your portfolio – both funds and stocks – in the most efficient way possible.
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This article originally published on Zacks Investment Research (zacks.com).
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