If you've been stuck searching for Small Cap Value funds, you might want to consider passing on by Templeton Global Smaller Companies A (TEMGX - Free Report) as a possibility. TEMGX has a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on nine forecasting factors like size, cost, and past performance.
The world of Small Cap Value mutual funds is an area filled with options, such as TEMGX. Small Cap Value funds invest in small companies with stock market valuation less than $2 billion. These funds offer more bang for an owner's buck, providing low P/E ratios, high dividend yields, and better-than-average P/S ratios.
History of Fund/Manager
Franklin Templeton is responsible for TEMGX, and the company is based out of San Mateo, CA. Since Templeton Global Smaller Companies A made its debut in June of 1981, TEMGX has garnered more than $1.07 billion in assets. The fund's current manager, Harlan B. Hodes, has been in charge of the fund since December of 2007.
Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 2.46%, and it sits in the bottom third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 5.81%, which places it in the bottom 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. The standard deviation of TEMGX over the past three years is 11.18% compared to the category average of 9.93%. Over the past 5 years, the standard deviation of the fund is 11.27% compared to the category average of 9.95%. This makes the fund more volatile than its peers over the past half-decade.
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, TEMGX lost 62.21% and underperformed comparable funds by 11.13%. This might suggest that the fund is a worse choice than its peers during a bear market.
Nevertheless, investors should also note that the fund has a 5-year beta of 0.95, which means it is hypothetically less 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 -7.25, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, TEMGX is a load fund. It has an expense ratio of 1.33% compared to the category average of 1.27%. From a cost perspective, TEMGX is actually more expensive than its peers.
Investors need to be aware that with this product, the minimum initial investment is $1,000; each subsequent investment has no minimum amount.
Overall, Templeton Global Smaller Companies A ( TEMGX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, average downside risk, and higher fees, this fund looks like a somewhat weak choice for investors right now.
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