Having trouble finding a Diversified Bonds fund? T. Rowe Price Global Multi-Sector Bond Investor (PRSNX) is a potential starting point. PRSNX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
PRSNX 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
T. Rowe Price is responsible for PRSNX, and the company is based out of Baltimore, MD. Since T. Rowe Price Global Multi-Sector Bond Investor made its debut in December of 2008, PRSNX has garnered more than $881.37 million in assets. The fund is currently managed by Kenneth A. Orchard who has been in charge of the fund since January of 2018.
Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 4.17%, and it sits 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 4.88%, which places it in the top third during this time-frame.
Modified duration is a measure of a given bond’s interest rate sensitivity, so when judging how fixed income securities will respond in a shifting rate environment, it is an excellent figure to look at.
If you believe interest rates will rise, this is an important factor to look at. PRSNX has a modified duration of 5.36, which suggests that the fund will decline 5.36% for every hundred-basis-point increase in interest rates.
We must remember to consider the fund’s average coupon, as income is traditionally a big reason for purchasing a fixed income security. This metric takes a look at the average payout by the fund in a given year. For example, this fund’s average coupon of 4.82% means that a $10,000 investment should result in a yearly payout of $482.
If you are looking for a strong level of current income, a higher coupon is a good choice, though it could pose a reinvestment risk; these risks can occur if rates are lower in the future when compared to the initial purchase date of the bond.
Since income is just one part of the bond picture, investors need to consider risk relative to broad benchmarks. With a beta of 0.7, this fund is less volatile than a broad market index of fixed income securities. Taking this into account, PRSNX has a positive alpha of 1.64, which measures performance on a risk-adjusted basis.
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, PRSNX has 34.05% in high quality bonds rated at least ‘AA’ or higher, while 34.04% are of medium quality, with ratings of ‘A’ to ‘BBB’. The fund’s junk bond component-bonds rated ‘BB’ or below-is at 25.67%, giving PRSNX an average quality of A. This means that it focuses on high quality securities.
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, PRSNX is a no load fund. It has an expense ratio of 0.63% compared to the category average of 0.75%. From a cost perspective, PRSNX is actually cheaper than its peers.
Investors should also note that the minimum initial investment for the product is $2,500 and that each subsequent investment needs to be at $100.
This puts this fund from T. Rowe Price in the top 20% of all mutual funds we have a rank on right now. As a result, this is likely an excellent choice for investors seeking an option in the Diversified Bonds category.
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 PRSNX to its peers as well for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.