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Is PRFHX a Strong Bond Fund Right Now?

Any investors hoping to find a Muni - Bonds fund could think about starting with T. Rowe Price Tax Free High Yield Retail (PRFHX). PRFHX carries a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

Zacks categorizes PRFHX as Muni - Bonds, which is a segment packed with options. Muni - Bonds funds invest in debt securities issued by states or local municipalities. These are generally used to finance construction of infrastructure, pay for schools, or other government functions. Some are backed by taxes (revenue bonds), while others are " general obligation " and may not be backed by a defined source. Investors usually appreciate the tax benefits that come with many municipal bonds, which are especially impressive for those in high tax brackets.

History of Fund/Manager

PRFHX is a part of the T. Rowe Price family of funds, a company based out of Baltimore, MD. T. Rowe Price Tax Free High Yield Retail made its debut in March of 1985, and since then, PRFHX has accumulated about $4.42 billion in assets, per the most up-to-date date available. The fund's current manager, Michael Cuggino, has been in charge of the fund since May of 2016.

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 2.18%, and is 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 1.35%, 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. The standard deviation of PRFHX over the past three years is 6.37% compared to the category average of 10.42%. Over the past 5 years, the standard deviation of the fund is 5.5% compared to the category average of 9.51%. This makes the fund less volatile than its peers over the past half-decade.

PRFHX carries a beta of 0.86, meaning that the fund is less volatile than a broad market index of fixed income securities. With this in mind, it has a negative alpha of -1.53, which measures performance on a risk-adjusted basis.

Ratings

However, it is worth noting that 26 % 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, PRFHX is a no load fund. It has an expense ratio of 0.65% compared to the category average of 0.82%. PRFHX is actually cheaper than its peers when you consider factors like cost.

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

Bottom Line

Overall, T. Rowe Price Tax Free High Yield Retail ( PRFHX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a somewhat average choice for investors right now.

For additional information on the Muni - Bonds area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into PRFHX too for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.


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