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Is PONPX a Strong Bond Fund Right Now?

On the lookout for a Diversified Bonds fund? Starting with PIMCO Income I2 (PONPX) is one possibility. PONPX has a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

We classify PONPX 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

PIMCO Funds is based in Newport Beach, CA, and is the manager of PONPX. PIMCO Income I2 made its debut in May of 2008, and since then, PONPX has accumulated about $39.63 billion in assets, per the most up-to-date date available. The fund's current manager is a team of investment professionals.

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Performance

Investors naturally seek funds with strong performance. This fund in particular has delivered a 5-year annualized total return of 2.87%, and is 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 1.54%, 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. PONPX's standard deviation over the past three years is 6.17% compared to the category average of 13.07%. Looking at the past 5 years, the fund's standard deviation is 6.47% compared to the category average of 14.13%. This makes the fund less volatile than its peers over the past half-decade.

With a beta of 0.46, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, PONPX has a positive alpha of 2.09, 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, PONPX has 68.12% in high quality bonds rated at least 'AA' or higher. The fund has an average quality of AA, and focuses on high quality securities.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, PONPX is a no load fund. It has an expense ratio of 0.60% compared to the category average of 0.95%. PONPX is actually cheaper than its peers when you consider factors like cost.

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, PIMCO Income I2 ( PONPX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, better downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

For additional information on the Diversified 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 PONPX too for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.

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