If you’ve been stuck searching for Large Cap Value funds, you might want to consider passing on by AIG Focused Dividend Strategy A (FDSAX) as a possibility. FDSAX holds a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on nine forecasting factors like size, cost, and past performance.
Large Cap Value mutual funds invest in stocks with a market capitalization of $10 billion or more, but whose share prices do not reflect their intrinsic value; this value investing strategy often leads to low P/E ratios and high dividend yields, though growth levels are often curtailed. The high-growth opportunity of these funds are slowed even further, as large-cap securities are generally in stable industries with low to moderate growth prospects. Therefore, Large Cap Value funds are usually more appealing to investors who are interested in a stable income stream.
History of Fund/Manager
FDSAX is a part of the AIG family of funds, a company based out of Kansas City, MO. AIG Focused Dividend Strategy A debuted in June of 1998. Since then, FDSAX has accumulated assets of about $1.67 billion, according to the most recently available information. The fund is currently managed by a team of investment professionals.
Investors naturally seek funds with strong performance. This fund in particular has delivered a 5-year annualized total return of 6.34%, and it sits in the bottom third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 3.95%, which places it in the bottom third during this time-frame.
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. Compared to the category average of 16.19%, the standard deviation of FDSAX over the past three years is 19.98%. Over the past 5 years, the standard deviation of the fund is 16.37% compared to the category average of 13.55%. This makes the fund more volatile than its peers over the past half-decade.
Investors should not forget about beta, an important way to measure a mutual fund’s risk compared to the market as a whole. FDSAX has a 5-year beta of 0.99, which means it is likely to be as volatile as the market average. 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. FDSAX’s 5-year performance has produced a negative alpha of -8.27, which means managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, FDSAX is a load fund. It has an expense ratio of 1.09% compared to the category average of 1%. So, FDSAX is actually more expensive than its peers from a cost perspective.
Investors should also note that the minimum initial investment for the product is $500 and that each subsequent investment needs to be at $100.
Overall, AIG Focused Dividend Strategy A ( FDSAX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, average downside risk, and higher fees, AIG Focused Dividend Strategy A ( FDSAX ) looks like a somewhat weak choice for investors right now.
This could just be the start of your research on FDSAXin the Large Cap Value category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.