2 Newly Rated Bond Mutual Funds to Buy

NEW YORK ( TheStreet Ratings) -- TheStreet.com Ratings initiated coverage of five bond mutual funds that accrued a sufficient track record of risk and performance data by the end of July 2011. Two of these newly rated mutual funds earned initial grades in the 'buy' range, plus three more funds start out at 'hold'.

Of the newly rated funds, none ranks higher than Frost Total Return Bond Fund ( FATRX) with an initial rating of A+, or Excellent. The fund has an inception date of Jul. 1, 2008.

The Frost Total Return Bond Fund seeks to maximize total return, consisting of income and capital appreciation, consistent with the preservation of principal. The fund invests at least 80 percent of its net assets in fixed income securities. The adviser actively manages the duration of the fund and purchases securities such that the average weighted duration of the fund will typically range within plus or minus three years of the benchmark duration of the fund.

The fund may invest in U.S. dollar-denominated fixed income securities such as U.S. Treasury securities, governmental agency debt, corporate debt, asset-backed securities, taxable municipal bonds, collateralized mortgage obligations and residential and commercial mortgage-backed securities. The fund has an effective duration of 3.24 years and an average weighted maturity of 5.13 years. This fund averaged a total return of 10.0% over the last three years and 8.4% in the last year. 1.95% of this fund is held the 5.25% corporate debt of Transocean ( RIG).

The only other bond mutual fund with an initial rating in the 'buy' range, PIA High Yield Fund ( PHYSX), earned a grade of B- averaging a return of 10.6% in three years and 13.2% in the last year. The Fund seeks a high level of current income. The fund invests, under normal circumstances, at least 80 percent of its net assets in a diversified portfolio of domestic and foreign high yield instruments, defined as bonds, forward commitments, loan participations and assignments, and preferred stocks.

The fund invests up to 5 percent of its net assets in securities denominated in foreign currencies, up to 10 percent of its net assets in securities and instruments that are economically tied to emerging market countries and up to 5 percent of its net assets in derivative instruments, such as options, futures contracts or swap agreements. The fund has a duration of 4.4 years and an average weighted maturity of 6.0 years. Top corporate debt holdings include United Rentals Inc ( URI) and Stoneridge Inc ( SRI).

Three other bond mutual funds offered by Frost Investment Advisors earned initial grades in the 'hold' range with Frost Municipal Bond Fund ( FAUMX) at C+, Frost Low Duration Bond Fund ( FADLX) at C+, and the Frost Low Duration Municipal Bond Fund ( FALMX) at C. All three funds began trading in July 2008.

Research Methodology

TheStreet.com Ratings condenses the available fund performance and risk data into a single composite opinion of each fund's risk-adjusted performance. This allows the unbiased identification of those funds that have historically done well and those that have underperformed the market. While there is no guarantee of future performance, these Investment Ratings provide a solid framework for making informed, timely investment decisions. In order to qualify for a rating, an open-end fund must either have three years of risk and return data or be an additional share class of an existing fund with at least three years of performance statistics.

Funds rated A or B are considered "Buy" rated based on a track record of higher than average risk-adjusted performance. Funds at the C level are rated as "Hold," while underperformers at the D and E levels our model ranks as "Sell."

-- Reported by Kevin Baker in Jupiter, Fla.

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Kevin Baker became the senior financial analyst for TheStreet Ratings upon the August 2006 acquisition of Weiss Ratings by TheStreet.com, covering equity and mutual fund ratings. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.