Having trouble finding a Muni - Bonds fund? American Century CA High Yield Municipals A (CAYAX) is a potential starting point. CAYAX possesses a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.
Objective
Zacks categorizes CAYAX as Muni - Bonds, which is a segment packed with options. Muni - Bonds funds invest in debt securities issued by states or local municipalities. These are generally used to finance construction of infrastructure, pay for schools, or other government functions. Some are backed by taxes (revenue bonds), while others are " general obligation " and may not be backed by a defined source. Investors usually appreciate the tax benefits that come with many municipal bonds, which are especially impressive for those in high tax brackets.
History of Fund/Manager
American Century is responsible for CAYAX, and the company is based out of Kansas City, MO. American Century CA High Yield Municipals A debuted in January of 2003. Since then, CAYAX has accumulated assets of about $48.41 million, according to the most recently available information. The fund is currently managed by Joseph Gotelli who has been in charge of the fund since January of 2012.
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 1.75%, and it sits in the middle 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 1.69%, 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. Compared to the category average of 13.06%, the standard deviation of CAYAX over the past three years is 8.73%. The fund's standard deviation over the past 5 years is 7.7% compared to the category average of 13.66%. This makes the fund less volatile than its peers over the past half-decade.
CAYAX carries a beta of 0.83, 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 0.94, 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, CAYAX has 22.8% in high quality bonds rated at least 'AA' or higher, while 22.95% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of BBB, and focuses on medium quality securities.
However, it is worth noting that 48 % of the bonds in this fund are not ranked, so take the average quality level with a bit of caution.
Expenses
Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, CAYAX is a load fund. It has an expense ratio of 0.74% compared to the category average of 0.89%. Looking at the fund from a cost perspective, CAYAX is actually cheaper than its peers.
This fund requires a minimum initial investment of $2,500, and each subsequent investment should be at least $50.
Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.
Bottom Line
Overall, American Century CA High Yield Municipals A ( CAYAX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, better downside risk, and lower fees, American Century CA High Yield Municipals A ( CAYAX ) looks like a good potential choice for investors right now.
For additional information on the Muni - 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 CAYAX too for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.
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This article originally published on Zacks Investment Research (zacks.com).
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