The All Cap Growth style ranks ninth out of the twelve fund styles as detailed in our 3Q19 Style Ratings for ETFs and Mutual Funds report. Last quarter, the All Cap Growth style ranked seventh. It gets our Neutral rating, which is based on an aggregation of ratings of 19 ETFs and 559 mutual funds in the All Cap Growth style. See a recap of our 2Q19 Style Ratings here.
Figures 1 and 2 show the five best and worst rated ETFs and mutual funds in the style. Not all All Cap Growth style ETFs and mutual funds are created the same. The number of holdings varies widely (from 13 to 2015). This variation creates drastically different investment implications and, therefore, ratings.
Investors seeking exposure to the All Cap Growth style should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2.
Our Robo-Analyst technology[1] empowers our unique ETF and mutual fund rating methodology, which leverages our rigorous analysis of each fund’s holdings.[2] We think advisors and investors focused on prudent investment decisions should include analysis of fund holdings in their research process for ETFs and mutual funds.
Figure 1: ETFs with the Best & Worst Ratings – Top 5
Image Source: New Constructs, LLC
* Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.
Sources: New Constructs, LLC and company filings
Four ETFs (QVM, PSET, QQXT, MILN) are excluded from Figure 1 because their total net assets (TNA) are below $100 million and do not meet our liquidity minimums.
Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5
Image Source: New Constructs, LLC
* Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity.
Sources: New Constructs, LLC and company filings
American Beacon Alpha Quant Quality Fund (AQQIX, AQQYX, AQQPX) is excluded from Figure 2 because its total net assets (TNA) are below $100 million and do not meet our liquidity minimums.
Fidelity NASDAQ Composite Index Tracking Stock (ONEQ) is the top-rated All Cap Growth ETF and DFA Investments U.S. Large Cap Growth Portfolio (DUSLX) is the top-rated All Cap Growth mutual fund. Both earn a Very Attractive rating.
First Trust U.S. Equity Opportunities ETF (FPX) is the worst rated All Cap Growth ETF and Virtus Zevenbergen Innovative Growth Stock Fund (SAGAX) is the worst rated All Cap Growth mutual fund. Both earn a Very Unattractive rating.
The Danger Within
Buying a fund without analyzing its holdings is like buying a stock without analyzing its business and finances. Put another way, research on fund holdings is necessary due diligence because a fund’s performance is only as good as its holdings’ performance. Don’t just take our word for it, see what Barron’s says on this matter.
PERFORMANCE OF HOLDINGs = PERFORMANCE OF FUND
Analyzing each holding within funds is no small task. Our Robo-Analyst technology enables us to perform this diligence with scale and provide the research needed to fulfill the fiduciary duty of care. More of the biggest names in the financial industry (see At BlackRock, Machines Are Rising Over Managers to Pick Stocks) are now embracing technology to leverage machines in the investment research process. Technology may be the only solution to the dual mandate for research: cut costs and fulfill the fiduciary duty of care. Investors, clients, advisors and analysts deserve the latest in technology to get the diligence required to make prudent investment decisions.
Figures 3 and 4 show the rating landscape of all All Cap Growth ETFs and mutual funds.
Figure 3: Separating the Best ETFs from the Worst Funds
Image Source: New Constructs, LLC
Sources: New Constructs, LLC and company filings
Figure 4: Separating the Best Mutual Funds from the Worst Funds
Image Source: New Constructs, LLC
Sources: New Constructs, LLC and company filings
This article originally published on July 16, 2019.
Disclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, style, or theme.
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[1] Harvard Business School features the powerful impact of our research automation technology in the case New Constructs: Disrupting Fundamental Analysis with Robo-Analysts.
[2] This paper compares our analytics on a mega cap company to other major providers. The Appendix details exactly how we stack up.
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