Is Federated MDT Small Cap Growth Fund A (QASGX) a Strong Mutual Fund Pick Right Now?

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If investors are looking at the Small Cap Growth fund category, make sure to pass over Federated MDT Small Cap Growth Fund A (QASGX). QASGX has a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

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Objective

QASGX is one of many different Small Cap Growth funds to choose from. Small Cap Growth mutual funds build portfolios around stocks with markets caps under $2 billion and large growth opportunities. Additionally, these portfolios typically highlight smaller companies in promising markets and industries.

History of Fund/Manager

QASGX is a part of the Federated family of funds, a company based out of Pittsburgh, PA. Federated MDT Small Cap Growth Fund A made its debut in September of 2005, and since then, QASGX has accumulated about $135.29 million in assets, per the most up-to-date date available. The fund is currently managed by a team of investment professionals.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 17.78%, and is in the middle 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 10.98%, 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. The standard deviation of QASGX over the past three years is 26.72% compared to the category average of 17.61%. Looking at the past 5 years, the fund’s standard deviation is 21.96% compared to the category average of 14.51%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

With a 5-year beta of 1.28, the fund is likely to be more volatile than the market average. Alpha is an additional metric to take into consideration, since it represents a portfolio’s performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. Over the past 5 years, the fund has a negative alpha of -3.57. This means that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Examining 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 mostly on equities that are traded in the United States.

This fund is currently holding about 89% stock in stocks, and these companies have an average market capitalization of $3.60 billion. The fund has the heaviest exposure to the following market sectors:

  1. Health
  2. Technology
  3. Other

This fund’s turnover is about 142%, so the fund managers are making more trades per year than the comparable average.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, QASGX is a load fund. It has an expense ratio of 1.13% compared to the category average of 1.21%. QASGX is actually cheaper than its peers when you consider factors like cost.

This fund requires a minimum initial investment of $1,500, and each subsequent investment should be at least $100.

Bottom Line

Overall, Federated MDT Small Cap Growth Fund A ( QASGX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, worse downside risk, and lower fees, Federated MDT Small Cap Growth Fund A ( QASGX ) looks like a somewhat weak choice for investors right now.

Want even more information about QASGX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis 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.

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