Any investors hoping to find a Diversified Bonds fund could think about starting with The Osterweis Strategic Income Fund (OSTIX). OSTIX has a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.
OSTIX is one of many Diversified Bonds funds to choose from. Diversified Bonds funds give investors exposure to a variety of fixed income types that span across different issuers, maturities, and credit levels. Usually, these funds will have a good amount of exposure to government debt, in addition to modest holdings in the corporate bond market.
History of Fund/Manager
OSTIX is a part of the Osterweis family of funds, a company based out of San Francisco, CA. The Osterweis Strategic Income Fund debuted in August of 2002. Since then, OSTIX has accumulated assets of about $5.40 billion, according to the most recently available information. A team of investment professionals is the fund’s current manager.
Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of 3.23%, and it sits in the top 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 5.32%, 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. OSTIX’s standard deviation over the past three years is 3.31% compared to the category average of -3.88%. The standard deviation of the fund over the past 5 years is 3.18% compared to the category average of -9.16%. This makes the fund more volatile than its peers over the past half-decade.
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.
For investors who think interest rates will rise, this is an important factor to consider. OSTIX has a modified duration of 1.5, which suggests that the fund will decline 1.5% for every hundred-basis-point increase in interest rates.
Since income is, of course, a big reason for purchasing a fixed income security, it is always important to consider the fund’s average coupon. Average coupon is a look at the average payout by the fund in a given year. For example, this fund’s average coupon of 6.65% means that a $10,000 investment should result in a yearly payout of $665.
For those seeking a strong level of current income, a higher coupon is typically good news. However, it could pose a reinvestment risk if rates are lower in the future when compared to the initial purchase date of the bond.
Investors also need to consider risk relative to broad benchmarks, as income is only one part of the bond picture. This fund has a beta of 0.04, meaning that it is less volatile than a broad market index of fixed income securities. Taking this into account, OSTIX has a positive alpha of 2.55, which measures performance on a risk-adjusted basis.
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, OSTIX is a no load fund. It has an expense ratio of 0.84% compared to the category average of 0.36%. Looking at the fund from a cost perspective, OSTIX is actually more expensive than its peers.
While the minimum initial investment for the product is $5,000, investors should also note that each subsequent investment needs to be at least $100.
Overall, The Osterweis Strategic Income Fund ( OSTIX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, worse downside risk, and higher fees, The Osterweis Strategic Income Fund ( OSTIX ) looks like a somewhat average choice for investors right now.
Don’t stop here for your research on Diversified Bonds funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare OSTIX to its peers as well 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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