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Aggressive Growth Funds Dip Again in Q3

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Investments in Aggressive Growth mutual funds are made with the purpose of high capital gains. These funds invest in companies that show high growth prospects. While the characteristic of high gains failed to live up to expectations in the second quarter, only a handful of Aggressive Growth mutual funds have come up with solid gains in the third quarter. The gains were restricted to Aggressive Growth mutual funds using the short selling or inverse strategies. Most others finished the quarter in the red.

The best-gaining Aggressive Growth mutual funds helped the category to be among the top 6 in the list of funds offering the best third-quarter returns. It joins categories such as Foreign, Precious Metal, Small Co, Growth and even Energy/Resources. However, these top gainers seek return that is inverse of the performance of their related sector. Short selling was the winning strategy in the third quarter, as market performance turned out to be the worst in four years. In this quarter, Bear Market funds were the leading gainers.

Read: 5 Biggest Mutual Fund Losers in Q3 2015

Mutual funds had a torrid time in the third quarter, leaving only a handful from this category with gains. The best gain was 18.2%, posted by Leuthold Grizzly Short Fund. This, however, has a minimum initial investment of $10000. As we move down the list, gains soon fizzle out. The worst performing fund Rydex Russell 2000 2x Strategy C (RYRLX) lost 23.7%.

Aggressive Growth Q3 Performance vs. Q2

Out of the 285 funds under our study, only 20 funds managed to post gains in the third quarter. Average gain for these 20 funds was 8.4%, which looks significantly high compared to broader trends. However, this favorable comparison is solely based on the robust gains posted by a handful of Aggressive Growth mutual funds that seek inverse returns. In the second quarter, 124 out 289 funds finished in the green. Their average gain was 1.5%.

In the third quarter, 265 funds finished in the negative territory. Their average loss was a significant 7.8%. In the second quarter, 161 funds had finished in the red with average loss of only 1.1%. Thus, the bearish sentiment in the third quarter was prominent. (Note: This number includes same funds of varied classes)

Performance has not only deteriorated from the second quarter, but the funds have also been showing a declining trend since the first quarter. In the first quarter, while the best gain reached 9.7%, the fifteenth ranked fund had scored gains of 5.4%. This time, only 2 funds (not considering the varied classes of same funds) posted an above 5% return. Ironically, barring the first funds, all other funds had negative returns.

Keep reading our Mutual Fund Commentary section, where we are reporting on performances and best picks from fund families and varied categories.

Top Performing Aggressive Growth Mutual Funds

The list below shows the 10 best-performing Aggressive Growth mutual funds. However, it contains 5 funds that have posted negative returns. This is indicative of how tough a quarter it was for the funds to perform.

Fund Name

Family Name

Q3 Total Return

Q3% Rank vs Obj

YTD Total Return

% Yield

Average EPS Growth

Beta vs S&P 500

Load

Rydex Inverse Dow 2X A

Guggenheim

11.63

1

8.16

0

NA

-2.16

Y

Rydex Inverse S&P 500 Str A

Guggenheim

5.4

3

3.11

0

NA

-0.98

Y

Rydex Inverse NASDAQ-100 2X Str A

Guggenheim

4.79

4

-6.7

0

NA

-2.11

Y

Zacks Market Neutral Fund A

Zacks Funds

2.88

5

1.65

0

10.63

0.12

Y

Guggenheim Multi-Hedge Strats A

Guggenheim

0.04

6

0.21

0.73

8.02

0.15

Y

JPMorgan Research Mrkt Neutral A

J.P. Morgan

-0.48

8

-2.36

0

10.43

0.11

Y

Altegris Equity Long Short A

Northern Lghts

-1.09

9

1.21

0

9.11

0.43

Y

PIMCO Eqs Long/Short Fund A

PIMCO Funds

-1.5

11

1.46

0

16.59

0.6

Y

Glenmede Long/Short Fund

Glenmede

-1.51

11

-1.69

0

9.8

0.41

N

Guggenheim Long Short Equity Fund A

Guggenheim

-1.94

12

-0.12

0

11.81

0.57

Y

Hancock Horizon Quant Lg/Sh A

Hancock Horiz

-2.05

14

-0.28

0

NA

0.8

Y

AllianzGI US Mngd Volatility A

Allianz

-2.13

15

-3.7

1.21

10.6

0.78

Y

Schwab Hedged Equity

Schwab Funds

-2.67

16

-2.16

0

10.8

0.71

N

Highland Long/Short Equity A

Pyxis

-3.75

18

-1.53

0

12.76

0.33

Y

Eagle Capital Appreciation A

Eagle Funds

-4.54

21

0.02

0

11.45

0.96

Y

Note: The list excludes the same funds with different classes, and institutional funds have been excluded. Funds having minimum initial investment above $5000 have been excluded.
Q3 % Rank vs Objective* equals the percentage the fund falls among its peers. Here, 1 being the best and 99 being the worst.

The top three performers, all belonging to the Guggenheim Funds family, seek return that is inverse of the performance of key benchmarks, i.e., the Dow Jones Industrial Average, S&P 500 and NASDAQ-100 Index. In the third quarter, the Dow and S&P 500 slumped 7.6% and 7%, respectively. Nasdaq 100 Index was down 4.9%.

The top three funds were accompanied by Zacks Market Neutral Fund A and Guggenheim Multi-Hedge Strats A, respectively, as the only two funds to finish in the green. While ZMNAX gained 2.9%, the Guggenheim fund returned a meager 0.04%.

The other funds in the list have negative returns but these have relatively higher beta scores. Also known as beta coefficient, this score measures the volatility of a mutual fund in contrast to broader markets. In fact, the top three performers had negative beta versus the S&P 500, indicating an inverse relationship with broader markets.

The 15th ranked Eagle Capital Appreciation A (HRCPX) carries a beta of 0.96, justifying its loss of 4.5% in the quarter. The other bottom-placed funds, Hancock Horizon Quant Lg/Sh A (HHQAX - Free Report) , AllianzGI US Mngd Volatility A , Schwab Hedged Equity (SWHEX - Free Report) and Highland Long/Short Equity A ( (HEOAX - Free Report) have beta versus the S&P 500 scores of 0.8, 0.78, 0.71 and 0.33, respectively. Notably, HHQAX, NGWAX, SWHEX and HEOAX lost 2.05%, 2.13%, 2.67% and 3.75%, respectively.

However investors need not lose heart, as some of the funds from the top 15 list carry a favorable Zacks Mutual Fund Rank and some have also been rallying higher. Hancock Horizon Quant Lg/Sh A carries a Zacks Mutual Fund Rank #1 (Strong Buy) and has gained nearly 3% since the end of September.

Altegris Equity Long Short A , Guggenheim Long Short Equity Fund A (RYAMX - Free Report) and SWHEX also carry a Zacks Mutual Fund Rank #2 (Buy). Following a 2.7% loss in the third quarter, Schwab Hedged Equity fund has jumped nearly 7% since September end.

Separately, PIMCO Eqs Long/Short Fund A (PMHAX - Free Report) , Glenmede Long/Short Fund (GTAPX - Free Report) , AllianzGI US Mngd Volatility A and Eagle Capital Appreciation A carry a Zacks Mutual Fund Rank #3 (Hold). However, JPMorgan Research Mrkt Neutral A (JMNAX) and Highland Long/Short Equity A are the only ones here that carry a Zacks Mutual Fund Rank #4 (Sell).

About Zacks Mutual Fund Rank

By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Pick the best mutual funds with the Zacks Rank.

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