On the lookout for a Muni - Bonds fund? Starting with Invesco (NYSE:IVZ) High Yield Municipals Y (ACTDX) should not be a possibility at this time. ACTDX holds a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.
Objective
ACTDX is one of many Muni - Bonds funds to choose from. Muni - Bonds funds invest in debt securities issued by states and local municipalities, which are typically used to pay for infrastructure construction, schools, and other government functions. These securities can be backed by taxes (revenue bonds), but others are known as " general obligation " and are not necessarily backed by a defined source. These bonds are especially attractive because of their inherent tax benefits.
History of Fund/Manager
Invesco is based in Kansas City, MO, and is the manager of ACTDX. Invesco High Yield Municipals Y debuted in March of 2006. Since then, ACTDX has accumulated assets of about $2.25 billion, according to the most recently available information. The fund's current manager is a team of investment professionals.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. ACTDX has a 5-year annualized total return of 3.72% and it sits in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 2.21%, 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, ACTDX's standard deviation comes in at 7.31%, compared to the category average of 11.29%. The fund's standard deviation over the past 5 years is 6.39% compared to the category average of 10.33%. This makes the fund less volatile than its peers over the past half-decade.
This fund has a beta of 0.98, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, ACTDX has a negative alpha of -1.21, 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, ACTDX has 25.22% in medium quality bonds, with ratings of 'A' to 'BBB'. The fund's junk bond component-bonds rated 'BB' or below-is at 25.4%, giving ACTDX an average quality of BBB. This means that it focuses on medium quality securities.
However, it is worth noting that 39 % of the bonds in this fund are not ranked, so take the average quality level with a bit of caution.
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, ACTDX is a no load fund. It has an expense ratio of 0.61% compared to the category average of 0.82%. Looking at the fund from a cost perspective, ACTDX is actually cheaper than its peers.
This fund requires a minimum initial investment of $1,000, and each subsequent investment should be at least $50.
Bottom Line
Overall, Invesco High Yield Municipals Y ( ACTDX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a somewhat weak choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the Muni - Bonds, make sure to go to www.zacks.com/funds/mutual-funds for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Get Your Free (ACTDX): Fund Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research