Is Lord Abbett Alpha Strategy A (ALFAX) a Strong Mutual Fund Pick Right Now?

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There are plenty of choices in the Small Cap Blend category, but where should you start your research? Well, one fund that you should consider investigating is Lord Abbett Alpha Strategy A (ALFAX). ALFAX has a Zacks Mutual Fund Rank of 3 (Hold), which is based on nine forecasting factors like size, cost, and past performance.

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Objective

We classify ALFAX in the Small Cap Blend category, an area rife with potential choices. Small Cap Blend mutual funds usually target companies with a market capitalization of less than $2 billion. A small-cap blend mutual fund allows investors to diversify their funds among various types of small-cap stocks, which can help reduce the volatility inherent in lower market cap companies.

History of Fund/Manager

Lord Abbett is based in Jersey City, NJ, and is the manager of ALFAX. Lord Abbett Alpha Strategy A debuted in March of 1998. Since then, ALFAX has accumulated assets of about $543.17 million, according to the most recently available information. The fund’s current manager is a team of investment professionals.

Performance

Investors naturally seek funds with strong performance. This fund in particular has delivered a 5-year annualized total return of 16.26%, 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 18.26%, 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 16.28%, the standard deviation of ALFAX over the past three years is 23.5%. Looking at the past 5 years, the fund’s standard deviation is 19.61% compared to the category average of 13.45%. 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 1.14, which means it is hypothetically more volatile than the market at large. 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. The fund has produced a negative alpha over the past 5 years of -3.98, which shows 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 80.1% stock in stocks and it has a negligible amount of assets in foreign securities. With turnover at about 12%, this fund makes fewer trades than the average comparable fund.

Expenses

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, ALFAX is a load fund. It has an expense ratio of 0.41% compared to the category average of 1.10%. From a cost perspective, ALFAX is actually cheaper than its peers.

This fund requires a minimum initial investment of $1,500, while there is no minimum for each subsequent investment.

Bottom Line

Overall, Lord Abbett Alpha Strategy A ( ALFAX ) has a neutral Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, worse downside risk, and lower fees, this fund looks like a somewhat average choice for investors right now.

Don’t stop here for your research on Small Cap Blend funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare ALFAX to its peers as well for additional information. And don’t forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.

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