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Is OSTIX a Strong Bond Fund Right Now?

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There are plenty of choices in the Diversified Bonds category, but where should you start your research? Well, one fund that you should consider investigating is 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.

Objective

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

Osterweis is based in San Francisco, CA, and is the manager of OSTIX. Since The Osterweis Strategic Income Fund made its debut in August of 2002, OSTIX has garnered more than $5.35 billion in assets. A team of investment professionals is the fund's current manager.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. OSTIX has a 5-year annualized total return of 6% 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 5.57%, which places it in the bottom 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 OSTIX over the past three years is 5.8% compared to the category average of 9.29%. Over the past 5 years, the standard deviation of the fund is 4.63% compared to the category average of 7.49%. This makes the fund less volatile than its peers over the past half-decade.

OSTIX carries a beta of 0.21, 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 4.56, 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, OSTIX 's junk bond component-bonds rated 'BB' or below-is at 88.27%. This means that the fund has an average quality of BBB, and focuses on medium 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, OSTIX is a no load fund. It has an expense ratio of 0.86% compared to the category average of 0.85%. OSTIX is actually more expensive than its peers when you consider factors like cost.

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.

Bottom Line

Overall, The Osterweis Strategic Income Fund ( OSTIX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and higher fees, this fund 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. 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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