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Is Templeton Global Smaller Companies A (TEMGX) a Strong Mutual Fund Pick Right Now?

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If you've been stuck searching for Global - Equity funds, you might want to consider passing on by Templeton Global Smaller Companies A (TEMGX - Free Report) as a possibility. TEMGX holds a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We note that TEMGX is a Global - Equity option, an investment area loaded with different options. While Global - Equity mutual funds invest their assets in large markets--think the U.S., Europe, and Japan--they aren't limited by geography. Their investment technique is one that leverages the global economy in order to offer stable returns.

History of Fund/Manager

TEMGX finds itself in the Franklin Templeton family, based out of San Mateo, CA. Templeton Global Smaller Companies A made its debut in June of 1981, and since then, TEMGX has accumulated about $97 million in assets, per the most up-to-date date available. The fund's current manager, Harlan Hodes, has been in charge of the fund since December of 2007.

Performance

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 8.11%, and is in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 3.56%, which places it in the top 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 15.71%, the standard deviation of TEMGX over the past three years is 21.91%. The standard deviation of the fund over the past 5 years is 18.1% compared to the category average of 13.37%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

The fund has a 5-year beta of 1.08, so investors should note that it is hypothetically more volatile than the market at large. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. TEMGX has generated a negative alpha over the past five years of -5.76, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, TEMGX is a load fund. It has an expense ratio of 1.38% compared to the category average of 1.16%. So, TEMGX is actually more expensive than its peers from a cost perspective.

This fund requires a minimum initial investment of $1,000, while there is no minimum for each subsequent investment.

Bottom Line

Overall, Templeton Global Smaller Companies A ( TEMGX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and higher fees, this fund looks like a poor potential choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the Global - Equity, make sure to go to www.zacks.com/funds/mutual-funds for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.


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