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If investors are looking at the Investment Grade Bond - Intermediate fund category, USAA Income Fund (USAIX - Free Report) could be a potential option. USAIX carries a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
We note that USAIX is an Investment Grade Bond - Intermediate option, which is a segment loaded with many different investment options. By targeting bonds that mature in more than three years but less than 15 years, Investment Grade Bond - Intermediate funds are a middle of the curve option. Fixed income instruments at this maturity level usually have medium duration risk, but their yields are respectable, especially in comparison to their short-maturity counterparts. Additionally, a focus on investment grade makes these funds safer, but yields tend to be lower than in the junk bond category.
History of Fund/Manager
USAA Group is based in San Antonio, TX, and is the manager of USAIX. Since USAA Income Fund made its debut in March of 1974, USAIX has garnered more than $2.99 billion in assets. The fund is currently managed by a team of investment professionals.
Performance
Investors naturally seek funds with strong performance. USAIX has a 5-year annualized total return of 3.14% and it sits 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 3.33%, which places it in the top 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, USAIX's standard deviation comes in at 3.14%, compared to the category average of 6.91%. The fund's standard deviation over the past 5 years is 3% compared to the category average of 7.19%. 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 those that believe interest rates will rise, this is an important factor to consider. USAIX has a modified duration of 5.73, which suggests that the fund will decline 5.73% for every hundred-basis-point increase in interest rates.
Income
We must remember to consider the fund's average coupon, as income is traditionally a big reason for purchasing a fixed income security. This metric calculates the fund's average payout in a given year. For example, this fund's average coupon of 3.99% means that a $10,000 investment should result in a yearly payout of $399.
A higher coupon is good for those seeking a strong level of current income, but it could also pose 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 1.01, meaning that it is more volatile than a broad market index of fixed income securities. Taking this into account, USAIX has a positive alpha of 0.62, 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, USAIX has 32.79% in high quality bonds rated at least 'AA' or higher, while 60.32% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of A, and focuses on high 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, USAIX is a no load fund. It has an expense ratio of 0.56% compared to the category average of 0.82%. From a cost perspective, USAIX is actually cheaper than its peers.
This fund requires a minimum initial investment of $3,000, and each subsequent investment should be at least $50.
Bottom Line
Overall, USAA Income Fund ( USAIX ) has a high Zacks Mutual Fund rank, strong performance, average downside risk, and lower fees compared to its peers.
For additional information on the Investment Grade Bond - Intermediate area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into USAIX too 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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Is USAIX a Strong Bond Fund Right Now?
If investors are looking at the Investment Grade Bond - Intermediate fund category, USAA Income Fund (USAIX - Free Report) could be a potential option. USAIX carries a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
We note that USAIX is an Investment Grade Bond - Intermediate option, which is a segment loaded with many different investment options. By targeting bonds that mature in more than three years but less than 15 years, Investment Grade Bond - Intermediate funds are a middle of the curve option. Fixed income instruments at this maturity level usually have medium duration risk, but their yields are respectable, especially in comparison to their short-maturity counterparts. Additionally, a focus on investment grade makes these funds safer, but yields tend to be lower than in the junk bond category.
History of Fund/Manager
USAA Group is based in San Antonio, TX, and is the manager of USAIX. Since USAA Income Fund made its debut in March of 1974, USAIX has garnered more than $2.99 billion in assets. The fund is currently managed by a team of investment professionals.
Performance
Investors naturally seek funds with strong performance. USAIX has a 5-year annualized total return of 3.14% and it sits 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 3.33%, which places it in the top 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, USAIX's standard deviation comes in at 3.14%, compared to the category average of 6.91%. The fund's standard deviation over the past 5 years is 3% compared to the category average of 7.19%. 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 those that believe interest rates will rise, this is an important factor to consider. USAIX has a modified duration of 5.73, which suggests that the fund will decline 5.73% for every hundred-basis-point increase in interest rates.
Income
We must remember to consider the fund's average coupon, as income is traditionally a big reason for purchasing a fixed income security. This metric calculates the fund's average payout in a given year. For example, this fund's average coupon of 3.99% means that a $10,000 investment should result in a yearly payout of $399.
A higher coupon is good for those seeking a strong level of current income, but it could also pose 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 1.01, meaning that it is more volatile than a broad market index of fixed income securities. Taking this into account, USAIX has a positive alpha of 0.62, 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, USAIX has 32.79% in high quality bonds rated at least 'AA' or higher, while 60.32% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of A, and focuses on high 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, USAIX is a no load fund. It has an expense ratio of 0.56% compared to the category average of 0.82%. From a cost perspective, USAIX is actually cheaper than its peers.
This fund requires a minimum initial investment of $3,000, and each subsequent investment should be at least $50.
Bottom Line
Overall, USAA Income Fund ( USAIX ) has a high Zacks Mutual Fund rank, strong performance, average downside risk, and lower fees compared to its peers.
For additional information on the Investment Grade Bond - Intermediate area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into USAIX too 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.