Is USAIX a Strong Bond Fund Right Now?

Any investors hoping to find an Investment Grade Bond - Intermediate fund could think about starting with USAA Income Fund (USAIX). USAIX carries a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

USAIX is one of many Investment Grade Bond - Intermediate funds to pick from. Investment Grade Bond - Intermediate funds focus on the middle part of the curve, generally with bonds that usually mature in more than three years but less than 15 years. Fixed income instruments with this maturity level usually have medium duration risk, but they also compensate investors with a modest yield, at least when compared to their short maturity counterparts. Additionally, the focus on investment grade will make funds here safer, but yields will be lower than in the junk bond category.

History of Fund/Manager

USAIX is a part of the USAA Group family of funds, a company based out of San Antonio, TX. USAA Income Fund made its debut in March of 1974, and since then, USAIX has accumulated about $3.23 billion in assets, per the most up-to-date date available. 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. This fund has delivered a 5-year annualized total return of 3.58%, and is in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 4.09%, which places it in the middle 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 USAIX over the past three years is 5.48% compared to the category average of 10.44%. Over the past 5 years, the standard deviation of the fund is 4.76% compared to the category average of 9.56%. This makes the fund less volatile than its peers over the past half-decade.

USAIX carries a beta of 1.23, meaning that the fund is more volatile than a broad market index of fixed income securities. With this in mind, it has a negative alpha of -0.54, 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, USAIX has 28.5% in high quality bonds rated at least 'AA' or higher, while 61.4% 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

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, USAIX is a no load fund. It has an expense ratio of 0.52% compared to the category average of 0.82%. USAIX is actually cheaper than its peers when you consider factors like cost.

This fund requires a minimum initial investment of $3,000, and each subsequent investment should be at least $50.

Bottom Line

Overall, USAA Income Fund ( USAIX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a somewhat average choice for investors right now.

For additional information on the Investment Grade Bond - Intermediate 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 USAIX 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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