Investors should think twice before choosing Federated Institutional High Yield Bond due to its low ranking and average performance
Pittsburgh: If you’re eyeing the High Yield Bonds fund category, you might want to skip the Federated Institutional High Yield Bond (FIHBX). It has a Zacks Mutual Fund Rank of 4, which means it’s not the best option right now. This ranking is based on factors like size, cost, and past performance.
FIHBX is part of the High Yield Bonds segment, which includes investments that are below investment grade. These are often called “junk” bonds because they come with a higher risk of default. But hey, they usually offer better yields compared to safer bonds, even though they share similar interest rate risks.
Federated, based in Pittsburgh, manages FIHBX. Since its launch in November 2002, the fund has attracted over $5.65 billion in assets, managed by a team of investment pros.
When it comes to performance, FIHBX has a 5-year annualized return of 3.35%, placing it in the middle of its peers. If you look at the 3-year return, it drops to 2.16%, which is in the bottom third. Just a heads up, the returns might not show all the fees, so they could be lower than expected.
Also, keep an eye on the fund’s volatility. FIHBX has a standard deviation of 8.34% over the last three years, which is lower than the category average of 12.03%. This means it’s less volatile than many of its peers.
With a beta of 0.19, FIHBX is less volatile than the broader market. Plus, it has a positive alpha of 3.52, which is a good sign for risk-adjusted performance.
Now, let’s talk expenses. FIHBX is a no-load fund with an expense ratio of 0.49%, which is lower than the category average of 0.94%. So, from a cost perspective, it’s a better deal than many others.
Just remember, the minimum initial investment is $1 million, but there’s no minimum for subsequent investments. Also, any fees from investment advisors aren’t included in the returns, so keep that in mind.
In summary, even with decent performance and lower fees, FIHBX has a low Zacks Mutual Fund rank. So, it might not be the best choice for investors right now.
If you’re curious about the High Yield Bonds segment, check out more tools and resources at www.zacks.com/funds/mutual-funds. And if stocks are more your thing, don’t forget to explore Zacks Rank and other tools for both new and seasoned investors.
