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Is MDCMX a Strong Bond Fund Right Now?

Zacks Equity Research

Muni - Bonds fund seekers should consider taking a look at BlackRock CA Municipals Opportunities A1 (MDCMX). MDCMX carries a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We classify MDCMX in the Muni - Bonds category, an area rife with potential choices. Muni - Bonds funds focus their investments on debt securities issued by state and local governments. These are typically used to pay for the construction of infrastructure, the operation of public schools, and other municipal functions. These securities can come in the form of revenue bonds, which are backed by taxes, as well as " general obligation " bonds that are not backed by a defined source. Investors are usually interested that come with most municipal bonds, which can be especially important for those in higher tax brackets.

History of Fund/Manager

BlackRock is based in New York, NY, and is the manager of MDCMX. BlackRock CA Municipals Opportunities A1 made its debut in October of 1994, and since then, MDCMX has accumulated about $111.70 million 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 carries a 5-year annualized total return of 3.82%, and it sits in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 4.98%, 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 MDCMX over the past three years is 1.91% compared to the category average of 8.16%. Looking at the past 5 years, the fund's standard deviation is 2.75% compared to the category average of 8.53%. This makes the fund less volatile than its peers over the past half-decade.

Bond Duration

Modified duration is a measure of a given bond's interest rate sensitivity, and is a metric that's a good way to judge how fixed income securities will respond in a shifting rate environment.

If you believe interest rates will rise, this is an important factor to look at. MDCMX has a modified duration of 4.59, which suggests that the fund will decline 4.59% for every hundred-basis-point increase in interest rates.

Income

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 4.76% means that a $10,000 investment should result in a yearly payout of $476.

A higher coupon is good for those seeking a strong level of current income, but it could also 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. MDCMX carries a beta of 0.24, meaning that the fund is less volatile than a broad market index of fixed income securities. With this in mind, it has a positive alpha of 0.86, which measures performance on a risk-adjusted basis.

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, MDCMX is a no load fund. It has an expense ratio of 0.53% compared to the category average of 0.83%. So, MDCMX is actually cheaper than its peers from a cost perspective.

Investors need to be aware that with this product, the minimum initial investment is $0; each subsequent investment has no minimum amount.

Bottom Line

Overall, BlackRock CA Municipals Opportunities A1 ( MDCMX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, better downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

Don't stop here for your research on Muni - 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 MDCMX to its peers as well for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.


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