Is BCOSX a strong bond fund right now?

If you've been stuck searching for Diversified Bonds funds, consider Baird Core Plus Bond Investor (BCOSX - Free Report) as a possibility. BCOSX holds a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

We classify BCOSX in the Diversified Bonds category, an area that is rife with potential choices.Diversified Bonds funds offer exposure to a wide variety of fixed income types, stretching across various issuers, credit levels, and maturities. Generally speaking, bond funds here will have sizable exposure to government debt, as well as modest holdings in the corporate bond market too.

History of fund/manager

BCOSX finds itself in the Baird family, based out of Milwaukee, WI. The Baird Core Plus Bond Investor made its debut in September of 2000 and BCOSX has managed to accumulate roughly $1.14 billion in assets, as of the most recently available information. A team of investment professionals is the fund's current manager.

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 0.3%, 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 6.43%, 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. Over the past three years, BCOSX's standard deviation comes in at 6.22%, compared to the category average of 9.13%. Over the past 5 years, the standard deviation of the fund is 6.22% compared to the category average of 9.76%. This makes the fund less volatile than its peers over the past half-decade.

Bond duration

Modified duration is a measure of a specific bond's interest rate sensitivity, and is an excellent way to judge how fixed income securities will respond to a shifting rate environment.

If you believe interest rates will rise, this is an important factor to look at. BCOSX has a modified duration of 5.87, which suggests that the fund will decline 5.87% for every hundred-basis-point increase in interest rates.

Income

It is important to consider the fund's average coupon because income is often a big reason for purchasing a fixed income security. This metric calculates the fund's average payout in a given year. For example, this fund's average coupon of 3.88% means that a $10,000 investment should result in a yearly payout of $388.

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. Income is only one part of the bond picture, investors also need to consider risk relative to broad benchmarks.

This fund has a beta of 0.92, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, BCOSX has a positive alpha of 0.47, which measures performance on a risk-adjusted basis.

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, BCOSX is a no load fund. It has an expense ratio of 0.55% compared to the category average of 0.82%. So, BCOSX is actually cheaper than its peers from a cost perspective.

This fund requires a minimum initial investment of $2,500, and each subsequent investment should be at least $100.

Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.