FBDAX
Franklin Total Return-Adv
Introduction to Franklin Total Return-Adv
The Franklin Total Return-Adv (FBDAX) is a mutual fund designed to provide investors with a high level of current income while maintaining the preservation of capital. As a secondary goal, the fund seeks capital appreciation over the long term. Managed by Franklin Templeton Investments, FBDAX falls under the Intermediate Bond category, making it an attractive option for investors looking for a balance between income and risk. With an expense ratio of 0.64%, the fund offers a competitive yield of 4.05%, appealing to those who prioritize income generation in their investment strategy.
At A Glance
Executive Summary
FBDAX offers a 4.05% yield with a focus on income and capital preservation, outperforming its benchmark with a 1-year return of 8.71%.
High yield of 4.05% for income-focused investors. Strong 1-year return of 8.71%, outperforming benchmark. Diversified bond portfolio with government and corporate exposure.
Higher expense ratio of 0.64% compared to peers. Negative three-year return of -2.66%. Limited equity exposure for growth potential.
Performance in a Competitive Landscape
FBDAX has demonstrated strong performance, particularly in the past year, with an impressive 1-year return of 8.71%, surpassing its benchmark, the BBG Barclay Agg Bond- US Composite TR Ix, which posted a 1-year return of 7.85%. This outperformance highlights the fund’s ability to navigate market fluctuations effectively. However, it’s important to note the fund’s three-year return of -2.66%, which may raise concerns for some investors. Despite this, the fund’s long-term performance since inception remains positive at 3.97%, indicating its potential for capital appreciation over time.
Portfolio Composition and Sector Allocation
The portfolio of FBDAX is heavily weighted towards bonds, with a total bond allocation of 116.35%. This includes significant investments in government and corporate bonds, which together make up over 59% of the portfolio. The fund’s top holdings include U.S. Treasury Notes and Federal National Mortgage Association securities, reflecting a focus on high-quality, income-generating assets. Notably, the fund has a 100% allocation to the energy sector, which may appeal to investors seeking exposure to this industry. The fund’s diversified bond sector allocation, including securitized and derivatives, further enhances its income potential.
Risk Metrics and Volatility Analysis
FBDAX exhibits a relatively stable risk profile, with a beta of 1.02, indicating its sensitivity to market movements is slightly above average. The fund’s alpha of 0.85% suggests it has added value beyond the benchmark’s performance. The Sharpe Ratio of 0.14 and Treynor Ratio of 0.83 reflect the fund’s risk-adjusted returns, which are moderate but consistent with its income-focused objective. The fund’s standard deviation of 1.73% and downside risk of 1.67% indicate a controlled level of volatility, making it suitable for investors seeking stability in their bond investments.
Comparative Analysis with Similar Funds
When compared to similar funds, FBDAX holds its ground with a competitive yield of 4.05%. For instance, AMG Beutel Goodman Core Plus Bond-I (ADLIX) offers a slightly higher yield of 4.55% but with a lower expense ratio of 0.48%. Meanwhile, Tributary Income-Inst (FOINX) and AMG GW&K Core Bond ESG-I (MBDFX) provide lower yields of 3.01% and 3.43%, respectively, but with significantly lower expense ratios. This comparison highlights FBDAX’s strength in income generation, albeit at a higher cost, which may be justified by its superior 1-year performance.
Max Drawdown and Recovery Insights
FBDAX experienced a maximum drawdown of -4.0%, with a drawdown length of 2 months and a recovery length of 3 months. This relatively quick recovery period demonstrates the fund’s resilience in adverse market conditions. The peak and valley dates, from February to April 2024, indicate a period of market volatility that the fund managed to navigate effectively. This resilience is a key consideration for investors who prioritize capital preservation alongside income generation, as it underscores the fund’s ability to recover from short-term setbacks.
Investor Suitability and Strategic Fit
FBDAX is particularly well-suited for income-focused investors who prioritize capital preservation. Its high yield of 4.05% and strong 1-year performance make it an attractive option for those seeking steady income streams. However, the fund’s higher expense ratio and negative three-year return may deter cost-sensitive investors or those seeking growth potential. The fund’s heavy bond allocation and minimal equity exposure align with conservative investment strategies, making it ideal for risk-averse investors or those nearing retirement who seek stability and income.
Conclusion: Why Choose Franklin Total Return-Adv?
Franklin Total Return-Adv (FBDAX) stands out for its high yield and focus on income generation, making it a compelling choice for investors seeking stable returns in the bond market. Its strong 1-year performance and resilience during market downturns highlight its effectiveness in achieving its investment objectives. While the fund’s expense ratio is higher than some peers, its superior income potential and capital preservation focus justify the cost for many investors. FBDAX is best suited for those who value income and stability over aggressive growth, particularly in uncertain economic environments.
Similar Securities
DODIX: Dodge & Cox Income-I | Stable Income & Capital Preservation
DODIX offers a low expense ratio and strong yield, focusing on income and capital preservation, outperforming its benchmark with a 9.65% 1-year return.
BFMCX: BlackRock Core Bond-Inst | Stable Income with Low Expense Ratio
BFMCX offers a 4.12% yield with a low 0.44% expense ratio, maintaining high correlation with its benchmark for consistent performance.
FSMIX: Franklin Strategic Mortgage-A1 | High Income Government Bond Fund
FSMIX offers high income and capital appreciation with a 0.76% expense ratio, investing 80% in US government mortgage securities.
PINCX: Putnam Income-A | High Income Global Bond Fund
PINCX offers a 7.50% yield with a focus on global bonds, outperforming peers with a 9.61% 1-year return and a 0.76% expense ratio.
ABNDX: American Funds Bond Fund of America-A | High Income & Capital Preservation
ABNDX offers a 4.23% yield with a focus on income and capital preservation, featuring a diverse bond portfolio and competitive performance.
Futher Reading
https://finance.yahoo.com/quote/FBDAX/”>Yahoo: Franklin Total Return-Adv
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