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Is Alger Small Cap Focus A (AOFAX) a Strong Mutual Fund Pick Right Now?

On the lookout for a Mutual Fund Equity Report fund? Starting with Alger Small Cap Focus A (AOFAX) should not be a possibility at this time. AOFAX has a Zacks Mutual Fund Rank of 4 (Sell), which is based on various forecasting factors like size, cost, and past performance.

History of Fund/Manager

Alger Funds is based in New York, NY, and is the manager of AOFAX. Alger Small Cap Focus A debuted in March of 2008. Since then, AOFAX has accumulated assets of about $226.74 million, according to the most recently available information. The fund's current manager, Amy Zhang, has been in charge of the fund since February of 2015.

Performance

Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 1.75%, and it sits in the bottom third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of -6.01%, which places it in the bottom third during this time-frame.

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When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Over the past three years, AOFAX's standard deviation comes in at 24.62%, compared to the category average of 19.06%. The fund's standard deviation over the past 5 years is 25.59% compared to the category average of 16.92%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should note that the fund has a 5-year beta of 1.02, which means it is hypothetically as volatile as the market at large. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. Over the past 5 years, the fund has a negative alpha of -7.53. This means that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Investigating the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is principally on equities that are traded in the United States.

This fund is currently holding about 90.29% stock in stocks, which have an average market capitalization of $6.05 billion. The fund has the heaviest exposure to the following market sectors:

  • Technology

  • Health

  • Services

Turnover is 37.57%, which means this fund makes fewer trades than the average comparable fund.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, AOFAX is a load fund. It has an expense ratio of 1.32% compared to the category average of 1.19%. Looking at the fund from a cost perspective, AOFAX is actually more expensive than its peers.

Investors need to be aware that with this product, the minimum initial investment is $1,000; each subsequent investment needs to be at least $50.

Bottom Line

Overall, Alger Small Cap Focus A ( AOFAX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, worse downside risk, and higher fees, this fund looks like a somewhat weak choice for investors right now.

For additional information on the Mutual Fund Equity Report area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into AOFAX too for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.

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