FISAX
Franklin Adjustable US Gov Securities-A
Introduction to Franklin Adjustable US Gov Securities-A
The Franklin Adjustable US Gov Securities-A (FISAX) is a mutual fund designed to provide investors with a high level of current income while maintaining lower volatility of principal compared to funds investing in fixed-rate securities. This fund is part of the Franklin Templeton Investments family and falls under the Short Term Government category. It primarily invests in adjustable-rate U.S. government mortgage securities, ensuring that at least 80% of its net assets are allocated to this sector. With a focus on government-backed securities, FISAX aims to offer a stable investment option for those seeking income with reduced risk.
At A Glance
Executive Summary
FISAX offers high income with low volatility, investing 80% in adjustable-rate U.S. government securities. Competitive yield of 4.68%.
High yield of 4.68% for income-focused investors. Low volatility with a beta of 0.25. Strong government-backed securities allocation.
Negative alpha of -1.78% indicates underperformance. Higher expense ratio of 0.85% compared to peers. Limited upside potential with -6.22%.
Performance Analysis: Navigating Market Conditions
FISAX has demonstrated a mixed performance over various time frames. Over the past year, the fund has achieved a return of 6.07%, which is commendable given the current market conditions. However, its five-year and ten-year annualized returns stand at 1.24% and 0.81%, respectively, indicating a more conservative growth trajectory. The fund’s inception return is 3.24%, reflecting its long-term commitment to providing stable income. Despite these figures, the fund’s alpha is -1.78%, suggesting it has underperformed its benchmark, the BBG Barclay Agg Bond- US Composite TR Ix, which had a 1-year return of 7.85%. This underperformance highlights the challenges faced by the fund in capturing market opportunities.
Portfolio Composition: A Focus on Government Securities
The portfolio of FISAX is heavily weighted towards government securities, with 34.55% of its assets in this category. Additionally, 60.99% of the portfolio is allocated to securitized bonds, primarily adjustable-rate U.S. government mortgage securities. This allocation strategy is designed to provide a balance between income generation and principal stability. The top holdings include a significant position in the 2 Year Treasury Note Future Dec 24, accounting for 26.71% of the portfolio, and various U.S. Treasury Notes and Federal National Mortgage Association securities. This focus on government-backed securities ensures a lower risk profile, appealing to conservative investors.
Risk Metrics: Understanding Volatility and Stability
FISAX exhibits a low volatility profile, as evidenced by its beta of 0.25, indicating that it is less volatile than the broader market. The fund’s standard deviation is 0.54%, further underscoring its stability. However, the Sharpe Ratio of -0.95 and Treynor Ratio of -7.11 suggest that the fund has not been able to generate returns commensurate with its risk level. The downside risk, measured by the Ulcer Index, is 0.29, indicating limited potential for significant losses. Despite these metrics, the fund’s R-Squared value of 60.77% shows a moderate correlation with its benchmark, suggesting that while it follows market trends, it also has unique characteristics.
Comparative Analysis: How FISAX Stacks Up Against Peers
When compared to similar funds, FISAX presents a mixed picture. Its expense ratio of 0.85% is higher than some peers, such as Commerce Short-Term Government-Inst (CFSTX) with an expense ratio of 0.68%. However, FISAX offers a competitive yield of 4.68%, which is higher than some alternatives like PIMCO Low Duration-A (PTLAX) with a yield of 3.87%. In terms of returns, FISAX’s 1-year return of 6.07% is comparable to peers like Calvert UltraShort Duration Income-A (CULAX) at 6.26%. These comparisons highlight FISAX’s strengths in yield and income generation, though its higher expense ratio may be a consideration for cost-conscious investors.
Investor Suitability: Who Should Consider FISAX?
FISAX is particularly suitable for conservative investors seeking a stable income stream with lower volatility. Its focus on adjustable-rate U.S. government mortgage securities provides a level of security that is appealing to those wary of market fluctuations. The fund’s high yield of 4.68% makes it an attractive option for income-focused investors, especially those looking for government-backed securities. However, potential investors should be aware of the fund’s higher expense ratio and its recent underperformance relative to its benchmark. Overall, FISAX is best suited for those prioritizing income and stability over aggressive growth.
Expense Considerations: Balancing Cost and Performance
The expense ratio of FISAX stands at 0.85%, which is relatively high compared to some of its peers. This cost factor is crucial for investors to consider, as it can impact net returns over time. While the fund offers a competitive yield, the higher expense ratio may deter cost-sensitive investors. It’s important to weigh this cost against the fund’s performance and income potential. For investors who prioritize income and are willing to accept a higher expense ratio for the stability and security of government-backed securities, FISAX remains a viable option. However, those seeking lower-cost alternatives may need to explore other funds within the same category.
Conclusion: The Unique Appeal of FISAX
In conclusion, the Franklin Adjustable US Gov Securities-A (FISAX) stands out for its focus on providing high income with lower volatility through investments in adjustable-rate U.S. government mortgage securities. Its competitive yield of 4.68% and stable portfolio composition make it an attractive choice for conservative, income-focused investors. However, the fund’s higher expense ratio and recent underperformance relative to its benchmark are important considerations. FISAX is best suited for those who value income stability and are comfortable with the associated costs. For investors seeking a reliable income stream with government-backed security, FISAX offers a compelling option.
Similar Securities
FISAX: Franklin Adjustable US Gov Securities-A | High Income, Low Volatility
FISAX offers high income with low volatility, investing 80% in adjustable-rate U.S. government securities. Competitive yield of 4.68%.
Futher Reading
https://www.morningstar.com/funds/xnas/FISAX/quote
https://finance.yahoo.com/quote/FISAX/”>Yahoo: Franklin Adjustable US Gov Securities-A
https://ftcloud.fasttrack.net/web/chart/FISAX
https://www.wsj.com/market-data/quotes/mutualfund/FISAX
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