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Is Alger Mid Cap Growth Institutional Fund I (ALMRX) a Strong Mutual Fund Pick Right Now?

If you've been stuck searching for Mid Cap Growth funds, you might want to consider passing on by Alger Mid Cap Growth Institutional Fund I (ALMRX) as a possibility. ALMRX has a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

Zacks categorizes ALMRX as Mid Cap Growth, a segment packed with options. Mid Cap Growth mutual funds aim to target companies with a market capitalization between $2 billion and $10 billion that are also expected to exhibit more extensive growth opportunities for investors than their peers. A firm is typically considered to be a growth stock if it consistently posts impressive sales and/or earnings growth.

History of Fund/Manager

ALMRX finds itself in the Alger Funds family, based out of New York, NY. Since Alger Mid Cap Growth Institutional Fund I made its debut in November of 1993, ALMRX has garnered more than $79.95 million in assets. The fund is currently managed by Teresa McRoberts who has been in charge of the fund since February of 2015.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. ALMRX has a 5-year annualized total return of 8.25% and it sits in the middle 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 17.27%, which places it in the middle 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. Over the past three years, ALMRX's standard deviation comes in at 15.72%, compared to the category average of 13.59%. Looking at the past 5 years, the fund's standard deviation is 15.32% compared to the category average of 13.11%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors cannot discount the risks to this segment though, as it is always important to remember the downside for any potential investment. In the most recent bear market, ALMRX lost 63.45% and underperformed comparable funds by 11.79%. This makes the fund a possibly worse choice than its peers during a sliding market environment.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. ALMRX has a 5-year beta of 1.2, which means it is likely to be more volatile than the market average. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. ALMRX's 5-year performance has produced a negative alpha of -3.56, which means managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Exploring 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 principally on equities that are traded in the United States.

The mutual fund currently has 93.63% of its holdings in stocks, which have an average market capitalization of $15.49 billion. The fund has the heaviest exposure to the following market sectors:

  1. Technology
  2. Retail Trade
  3. Health

Turnover is 127.57%, which means this fund makes more trades in a given year than the category average.

Expenses

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, ALMRX is a no load fund. It has an expense ratio of 1.34% compared to the category average of 1.18%. So, ALMRX is actually more expensive than its peers from a cost perspective.

This fund requires a minimum initial investment of $0, while there is no minimum for each subsequent investment.

Bottom Line

Overall, Alger Mid Cap Growth Institutional Fund I ( ALMRX ) has a low Zacks Mutual Fund rank, similar performance, average downside risk, and higher fees compared to its peers.

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