Is AIG Focused Dividend Strategy A (FDSAX) a Strong Mutual Fund Pick Right Now?
There are plenty of choices in the Large Cap Blend category, but where should you start your research? Well, one fund that may not be worth investigating is AIG Focused Dividend Strategy A (FDSAX). FDSAX carries a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on nine forecasting factors like size, cost, and past performance.
FDSAX is part of the Large Cap Blend section, an area that boasts an array of many possible options. Large Cap Blend mutual funds most often invest in firms with a market capitalization of $10 billion or more. By investing in bigger companies, these funds offer more stability, and are often well-suited for investors with a " buy and hold " mindset. Blended funds mix large, established companies into their holdings, which gives investors exposure to both value and growth at the same time.
History of Fund/Manager
FDSAX finds itself in the AIG family, based out of Kansas City, MO. AIG Focused Dividend Strategy A debuted in June of 1998. Since then, FDSAX has accumulated assets of about $3.18 billion, according to the most recently available information. The fund is currently managed by a team of investment professionals.
Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund carries a 5-year annualized total return of 7.04%, and is in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 8.18%, 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 10.36%, the standard deviation of FDSAX over the past three years is 14.28%. The standard deviation of the fund over the past 5 years is 13.2% compared to the category average of 10.29%. This makes the fund more volatile than its peers over the past half-decade.
Investors cannot discount the risks to this segment though, as it is always important to remember the downside for any potential investment. In FDSAX's case, the fund lost 53.01% in the most recent bear market and underperformed its peer group by 2%. These results could imply that the fund is a worse choice than its peers during a sliding market environment.
Investors should note that the fund has a 5-year beta of 0.99, so it is likely going to be as volatile as 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. Over the past 5 years, the fund has a negative alpha of -3.1. This means that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
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 mostly on equities that are traded in the United States.
Right now, 76.12% of this mutual fund's holdings are stocks, which have an average market capitalization of $108.76 billion. The fund has the heaviest exposure to the following market sectors:
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, FDSAX is a load fund. It has an expense ratio of 1.05% compared to the category average of 1.01%. 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 similar performance, average downside risk, and higher fees, this fund looks like a poor potential choice for investors right now.
Want even more information about FDSAX? 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. 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.