4 / 5 Stars
4 4 3 5 3
Zacks Investment Research
Standard & Poor's
5 / 5 Stars
#2 in Muni National Long
U.S. News evaluated 59 Muni National Long Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.
The fund has returned -1.03 percent over the past year, 6.30 percent over the past three years, 5.92 percent over the past five years, and 4.52 percent over the past decade.
|Trailing Returns||Updated 01.31.2014|
|Year to date||2.3%|
|3 Years (Annualized)||6.3%|
|5 Years (Annualized)||5.9%|
|10 Years (Annualized)||4.5%|
Fidelity Tax-Free Bond has found its stride.
As of February 05, 2014, the fund has assets totaling almost $2.26 billion invested in 844 different holdings. Its portfolio consists of municipal bonds (debt issued by state and local governments, as well as their agencies).
In 2008, when the muni market imploded, funds that focus on longer-dated bonds got hit particularly hard. Notably, the average fund in Morningstar's national long-term municipal bond category lost upwards of 9 percent that year as a massive selloff triggered panic among investors. This fund, however, managed to hold its losses to 3 percent. In 2009, an injection of stimulus money into state and local governments restored confidence, and longer-term bonds came rocketing back. During that time, this fund tacked on 13 percent.
Lately, management has been focusing on quality, with upwards of half of its bond holdings rated AA or better. One of the bigger changes to affect the fund recently was the June departure of co-manager Christine Thompson. Says Morningstar: "There's no need to mourn, though. Teamwork has always been a hallmark of Thompson's approach, and the skilled team she leaves behind has contributed to the fund's success for several years now." Going forward, one of the bigger risks for the fund is rising interest rates, as well as shaky state finances that roiled muni funds in late 2010. Rates, which are at historic lows, can only go up, and when that happens, bond prices will go down. Funds that invest in bonds with longer durations (as this one does) will be particularly vulnerable. The fund has returned -1.03 percent over the past year and 6.30 percent over the past three years.
Historically, the fund has done a fine job of achieving its goal: providing investors with steady income and tax advantages (muni investors traditionally do not need to pay federal income taxes on their interest). The fund launched in 2001 and came out of the gate strong. Between 2002 and 2008, the fund finished each year in the top third of its peer group, according to Morningstar. The fund has returned 5.92 percent over the past five years and 4.52 percent over the past decade.
According to the fund's prospectus: "[Management] considers ... the credit quality of the issuer, security-specific features, current valuation relative to alternatives in the market, short-term trading opportunities resulting from market inefficiencies, and potential future valuation. In managing the fund's exposure to various risks, including interest rate risk, [management] considers, among other things, the market's overall risk characteristics, the market's current pricing of those risks, information on the fund's competitive universe and internal views of potential future market conditions."
Role in Portfolio
Morningstar calls the fund a "core" holding.
Jamie Pagliocco and Kevin Ramundo manage the fund.
Fidelity Tax Free Bond Fund has an expense ratio of 0.25 percent.
Going forward, one of the bigger risks is rising interest rates. When interest rates go up, bond prices will fall.