Monday, March 31, 2008

Madame X: U.S. Large-Cap Funds

Here we have one index fund (FUSEX) and four actively managed funds:

FDGRX (Fidelity Growth Company) appears to be an excellent fund. It has been at the top of its rankings and shown a positive alpha and Sharpe ratio in all time frames. It has outperformed the index substantially in all time frames. It's down a little more than its peer fund year to date, but this is expected as it has a beta (sensitivity to stock market movement) above one. The other Fidelity actively managed fund (Fidelity Growth and Income, FGRIX), is below par. It has a negative alpha in all time frames, and except over a ten year horizon it has underperformed the index. It is in the bottom quartile of peer funds. Muhlenberg and Thompson Plumb are two funds that are good on the ten year horizon (and Muhlenkamp over five years too) but have both deteriorated in performance more recently. I'd heard Muhlenkamp had a great reputation while I've never heard of the other fund. Year to date Muhlenkamp is actually down less than 6% despite a high beta. I would hold this one - my impression is it will turnaround from some bad investment decisions in recent times. Thompson Plumb's manager believes that the economic cycle will again favor his fund soon again. I'm pretty skeptical about his explanation.

I don't have any problem with the allocation among these funds. The biggest chunks are in FDGRX and the index fund.

It's possible that you lost money in MUHLX and THPGX, but not as much as shown on your statement. So again the cost basis must be at fault.

No comments: