Is PIGIX a Strong Bond Fund Right Now?

If you've been stuck searching for Diversified Bonds funds, you might want to consider passing on by PIMCO Investment Grade Corporate Institutional PIGIX as a possibility. PIGIX has a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on various forecasting factors like size, cost, and past performance.

Objective

The world of Diversified Bonds funds is an area filled with options, such as PIGIX. Investors looking for exposure to a variety of fixed income types that stretch across issuers, maturities, and credit levels will find a good fit with Diversified Bonds funds. Typically, these funds have a solid amount of exposure to government debt, as well as modest holdings in the corporate bond market.

History of Fund/Manager

PIMCO Funds is based in Newport Beach, CA, and is the manager of PIGIX. Since PIMCO Investment Grade Corporate Institutional made its debut in March of 2000, PIGIX has garnered more than $5.25 billion in assets. The fund is currently managed by a team of investment professionals.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 0.35%, and is in the bottom 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 -3.13%, which places it in the middle 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. PIGIX's standard deviation over the past three years is 8.68% compared to the category average of 13.29%. Over the past 5 years, the standard deviation of the fund is 8.81% compared to the category average of 14.1%. This makes the fund less volatile than its peers over the past half-decade.

This fund has a beta of 0.96, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, PIGIX has a positive alpha of 1.15, 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, PIGIX has 31.6% in high quality bonds rated at least 'AA' or higher, while 60.9% 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, PIGIX is a no load fund. It has an expense ratio of 0.50% compared to the category average of 0.89%. So, PIGIX is actually cheaper than its peers from a cost perspective.

While the minimum initial investment for the product is $1 million, investors should also note that there is no minimum for each subsequent investment.

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 weak performance, better downside risk, and lower fees, PIMCO Investment Grade Corporate Institutional ( PIGIX ) has a low Zacks Mutual Fund rank, and therefore looks a somewhat weak choice for investors right now.

This could just be the start of your research on PIGIX in the Diversified Bonds category.

To read this article on Zacks.com click here.