SGVAX
Western Asset Mortgage Total Return-A
High Current Return Focus
The Western Asset Mortgage Total Return-A (SGVAX) is designed to provide investors with a high current return by investing predominantly in debt securities issued or guaranteed by the U.S. Government. This fund allocates at least 80% of its net assets to such securities, including U.S. Treasury and mortgage-related securities. This focus on government-backed securities aims to offer a stable income stream, making it an attractive option for income-focused investors. The fund’s yield of 4.53% is competitive within its category, providing a reliable source of income in a low-interest-rate environment.
At A Glance
Executive Summary
SGVAX offers high current return with 80% in U.S. government debt, competitive yield of 4.53%, and a focus on mortgage-related securities.
High current return with 4.53% yield 80% investment in U.S. government debt Strong performance with 10.18% 1-year return
Higher expense ratio at 0.96% Negative three-year return of -2.72% Limited sector diversification
Performance Metrics and Volatility
SGVAX has demonstrated a strong performance over the past year, with a 1-year return of 10.18%, outperforming its benchmark, the BBG Barclay Agg Bond- US Composite TR Ix, which returned 7.85%. However, the fund’s performance over longer periods, such as the three-year return of -2.72%, indicates some volatility. The fund’s standard deviation of 1.92% and a beta of 1.14 suggest moderate volatility compared to the benchmark. Despite this, the fund’s alpha of 2.33% indicates that it has generated returns above the expected level given its risk profile.
Portfolio Composition and Asset Allocation
The fund’s portfolio is heavily weighted towards securitized bonds, which make up 96% of its bond sector allocation. This focus on mortgage-related securities is a defining characteristic of SGVAX, providing exposure to a sector that can offer higher yields compared to traditional government bonds. The fund’s asset allocation shows a significant leverage position, with bonds accounting for 119.7% of the portfolio, offset by a negative cash position of -21.2%. This strategy aims to enhance returns but also introduces additional risk, which investors should consider.
Risk and Return Analysis
SGVAX’s risk metrics reveal a nuanced picture of its risk-return profile. The fund’s Sharpe ratio of 0.35 and Treynor ratio of 2.05 suggest that it has been able to deliver returns commensurate with its risk level. The fund’s correlation with its benchmark is high at 99.42%, indicating that its performance closely tracks the broader bond market. However, the fund’s max drawdown of -3.9% and a recovery length of three months highlight potential periods of underperformance. Investors should weigh these risks against the fund’s potential for high current returns.
Comparative Analysis with Peers
When compared to similar funds, SGVAX holds its ground with a competitive yield and recent performance. For instance, Pioneer Bond-A (PIOBX) and Columbia Bond-A (CNDAX) have similar 1-year returns of 10.13% and 10.06%, respectively, but SGVAX offers a slightly higher yield of 4.53%. However, SGVAX’s expense ratio of 0.96% is higher than its peers, which typically have expense ratios around 0.8%. This could be a consideration for cost-sensitive investors. Despite this, SGVAX’s focus on U.S. government-backed securities provides a unique value proposition.
Expense Ratio and Cost Considerations
The expense ratio of SGVAX stands at 0.96%, which is relatively high compared to its peers in the intermediate bond category. This higher cost could impact net returns, especially over the long term. Investors should consider whether the fund’s performance and yield justify the higher expense ratio. While the fund’s recent 1-year return of 10.18% is impressive, the negative three-year return of -2.72% suggests that the fund’s performance can be inconsistent. Cost-conscious investors may want to compare SGVAX’s expense ratio with those of similar funds to ensure it aligns with their investment strategy.
Suitability for Income-Focused Investors
SGVAX is particularly well-suited for investors seeking a high current return with a focus on government-backed securities. The fund’s investment strategy, which emphasizes U.S. Treasury and mortgage-related securities, provides a stable income stream with a yield of 4.53%. This makes it an attractive option for those looking to supplement their income, especially in a low-interest-rate environment. However, investors should be aware of the fund’s higher expense ratio and potential for volatility, as indicated by its risk metrics and historical performance.
Conclusion: A Strategic Choice for Yield Seekers
In conclusion, the Western Asset Mortgage Total Return-A (SGVAX) stands out for its focus on high current return through investments in U.S. government-backed securities. With a competitive yield of 4.53% and a strong 1-year return, it offers a compelling option for income-focused investors. However, the fund’s higher expense ratio and potential for volatility should be carefully considered. For those willing to accept these risks, SGVAX provides a unique opportunity to benefit from the stability and income potential of government-backed debt securities.
Similar Securities
WFBIX: iShares US Aggregate Bond IxFd-K | Low-Cost Bond Investment
WFBIX offers a low expense ratio of 0.05% and a yield of 3.58%, providing stable income with high correlation to its benchmark.
ACPSX: Invesco Core Plus Bond-A | Income-Focused Bond Fund
ACPSX offers a 4.63% yield with a focus on investment-grade bonds, outperforming its benchmark with a 10.64% 1-year return.
OFIAX: Invesco Intermediate Bond Factor-A | Growth and Income Bond Fund
OFIAX offers a competitive 3.56% yield with a focus on investment-grade bonds, balancing growth and income with a low 0.53% expense ratio.
PTATX: TRPrice Total Return-Adv | Diversified Bond Investment
PTATX offers a 4.72% yield with a diversified bond portfolio, outperforming its benchmark with a 1-year return of 8.45%.
SGVAX: Western Asset Mortgage Total Return-A | High Current Return with Government Debt Focus
SGVAX offers high current return with 80% in U.S. government debt, competitive yield of 4.53%, and a focus on mortgage-related securities.
Futher Reading
https://www.morningstar.com/funds/xnas/SGVAX/quote
https://finance.yahoo.com/quote/SGVAX/”>Yahoo: Western Asset Mortgage Total Return-A
https://ftcloud.fasttrack.net/web/chart/SGVAX
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