If investors are looking at the High Yield - Bonds fund category, make sure to pass over Federated Institutional High Yield Bond (FIHBX). FIHBX possesses a Zacks Mutual Fund Rank of 4 (Sell), which is based on various forecasting factors like size, cost, and past performance.
Objective
FIHBX 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
Federated is based in Pittsburgh, PA, and is the manager of FIHBX. Since Federated Institutional High Yield Bond made its debut in November of 2002, FIHBX has garnered more than $5.65 billion in assets. The fund's current manager is a team of investment professionals.
Performance
Of course, investors look for strong performance in funds. FIHBX has a 5-year annualized total return of 3.35% and it sits in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 2.16%, which places it in the bottom 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. Compared to the category average of 12.03%, the standard deviation of FIHBX over the past three years is 8.34%. The fund's standard deviation over the past 5 years is 8.98% compared to the category average of 13.15%. This makes the fund less volatile than its peers over the past half-decade.
With a beta of 0.19, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, FIHBX has a positive alpha of 3.52, which measures performance on a risk-adjusted basis.
Expenses
For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, FIHBX is a no load fund. It has an expense ratio of 0.49% compared to the category average of 0.94%. From a cost perspective, FIHBX is actually cheaper than its peers.
Investors should also note that the minimum initial investment for the product is $1 million and that 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.
Bottom Line
Overall, even with its comparatively similar performance, average downside risk, and lower fees, Federated Institutional High Yield Bond ( FIHBX ) has a low Zacks Mutual Fund rank, and therefore looks a somewhat weak choice for investors right now.
Your research on the High Yield - Bonds segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well 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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