There are plenty of choices in the International Bond – Developed category, but where should you start your research? Well, one fund that might be worth investigating is Invesco International Bond A (OIBAX). OIBAX possesses a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.
Objective
OIBAX is one of many International Bond – Developed funds to choose from. International Bond – Developed funds offer investors geographic diversification by focusing on fixed income securities from developed nations besides the United States. Top holdings include assets from countries like Japan, Germany, the UK, France, and Australia. While these is certainly an advantage, investors should be aware of currency risk.
History of Fund/Manager
OIBAX finds itself in the Invesco family, based out of Kansas City, MO. Invesco International Bond A made its debut in June of 1995, and since then, OIBAX has accumulated about $361.47 million in assets, per the most up-to-date date available. The fund is currently managed by a team of investment professionals.
Performance
Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 1.2%, and it sits 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 6.98%, 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. OIBAX’s standard deviation over the past three years is 8.67% compared to the category average of 10.16%. Looking at the past 5 years, the fund’s standard deviation is 9.86% compared to the category average of 11.82%. 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, and is a metric that’s a good way to judge how fixed income securities will respond in a shifting rate environment.
For those that believe interest rates will rise, this is an important factor to consider. OIBAX has a modified duration of 1.97, which suggests that the fund will decline 1.97% for every hundred-basis-point increase in interest rates.
Income
Since income is, of course, a big reason for purchasing a fixed income security, it is always 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 6.38% means that a $10,000 investment should result in a yearly payout of $638.
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.
OIBAX carries a beta of 0.41, 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 1.7, 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, OIBAX has 32.19 in high quality bonds rated at least “AA” or higher, while 27.94% are of medium quality, with ratings of “A” to “BBB”. The fund’s junk bond component-bonds rated “BB” or below-is at 33.83%, giving OIBAX an average quality of A. This means that it focuses on high quality securities.
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, OIBAX is a load fund. It has an expense ratio of 1.03% compared to the category average of 0.91%. So, OIBAX is actually more expensive than its peers from a cost perspective.
While the minimum initial investment for the product is $1,000, investors should also note that each subsequent investment needs to be at least $50.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
Overall, Invesco International Bond A ( OIBAX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and higher fees, Invesco International Bond A ( OIBAX ) looks like a good potential choice for investors right now.
This could just be the start of your research on OIBAX in the International Bond – Developed category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.
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This article originally published on Zacks Investment Research (zacks.com).
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