Is WMFAX a Strong Bond Fund Right Now?

If you have been looking for Muni - Bonds fund category, a potential starting could be Wells Fargo Municipals Bond Fund A (WMFAX). WMFAX bears a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

Objective

Zacks categorizes WMFAX 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

Wells Fargo is based in San Francisco, CA, and is the manager of WMFAX. Wells Fargo Municipals Bond Fund A debuted in April of 2005. Since then, WMFAX has accumulated assets of about $1.13 billion, according to the most recently available information. The fund is currently managed by a team of investment professionals.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 3.45%, 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 3.37%, 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. WMFAX's standard deviation over the past three years is 4.19% compared to the category average of 10.54%. Looking at the past 5 years, the fund's standard deviation is 3.92% compared to the category average of 9.66%. This makes the fund less volatile than its peers over the past half-decade.

WMFAX carries a beta of 0.73, meaning that the fund is less volatile than a broad market index of fixed income securities. With this in mind, it has a negative alpha of -0.32, 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, WMFAX has 46.39% in high quality bonds rated at least 'AA' or higher, while 42.23% are of medium quality, with ratings of 'A' to 'BBB'. The fund has an average quality of A, and focuses on high quality securities.

Expenses

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, WMFAX is a load fund. It has an expense ratio of 0.78% compared to the category average of 0.82%. WMFAX is actually cheaper than its peers when you consider factors like cost.

This fund requires a minimum initial investment of $1,000, and each subsequent investment should be at least $100.

Bottom Line

Overall, Wells Fargo Municipals Bond Fund A ( WMFAX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, better downside risk, and lower fees, Wells Fargo Municipals Bond Fund A ( WMFAX ) looks like a somewhat average 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 WMFAX too 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.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Get Your Free (WMFAX): Fund Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research