Investor

Is Ariel Fund Investor (ARGFX) a good mutual fund choice right now?

IIf investors are looking at the Mutual Fund Equity Report fund category, be sure not to go through Ariel Fund Investor (ARGFX). ARGFX carries a Zacks mutual fund ranking of 4 (sell), which is based on nine predictor factors such as size, cost and past performance.

Fund/manager history

Ariel is based in Chicago, Illinois, and is the Principal of ARGFX. Ariel Fund Investor got its start in November 1986, and since then ARGFX has accumulated approximately $1.43 billion in assets, according to the most recent date available. A team of investment professionals is the current manager of the fund.

Performance

Clearly, what investors are looking for in these funds is strong performance relative to their peers. This fund has a 5-year annualized total return of 9.14% and is in the middle third of its peers in the category. Investors who prefer to analyze shorter time frames should look at its 3-year annualized total return of 13.75%, which puts it in the middle third over this period.

When looking at a fund’s performance, it’s also important to note the standard deviation of returns. The lower the standard deviation, the less volatility the fund experiences. Compared to the category average of 18.76%, ARGFX’s standard deviation over the past three years is 25.65%. The fund’s standard deviation over the past 5 years is 23.23% compared to the category average of 16.74%. This makes the fund more volatile than its peers over the past half-decade.

Risk factors

The fund has a 5-year beta of 1.27, so investors should note that it is hypothetically more volatile than the market as a whole. Alpha is an additional metric to consider, as it represents the performance of a portfolio on a risk-adjusted basis relative to a benchmark, which in this case is the S&P 500. The 5-year performance of ARGFX produced a negative alpha of -5.69, which means managers in this portfolio struggle to pick stocks that generate returns above the benchmark.

Assets

Investigating the stock 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 whether there are any inherent biases in their approach. For this particular fund, the focus is primarily on stocks that are traded in the United States.

Currently, 75.58% of this mutual fund’s holdings are in stocks, which have an average market capitalization of $10.46 billion. The fund has the highest exposure to the following market sectors:

  1. Not durable
  2. Finance
  3. Services

Expenses

For investors, it is essential to take a closer look at the cost parameters, as costs are increasingly important for mutual fund investments. 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, ARGFX is a no-fee fund. It has an expense ratio of 0.99% compared to the category average of 1.09%. Thus, ARGFX is actually cheaper than its peers from a cost perspective.

Investors should be aware that with this product the minimum initial investment is $1,000; each subsequent investment must be at least $100.

Conclusion

Overall, Ariel Fund Investor (ARGFX) has a low ranking of Zacks Mutual Fund, and in conjunction with its relatively similar performance, worse downside risk, and lower fees, Ariel Fund Investor (ARGFX) seems like a top choice. somewhat weak for investors at the moment.

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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.