If investors are looking at the Sector - Real Estate fund category, make sure to pass over Franklin Real Estate Security A (FREEX - Free Report) . FREEX carries a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.
Zacks categorizes FREEX in Sector - Real Estate, which is a segment packed with options. Real estate investment trusts (REITs) are a popular income vehicle thanks their taxation rules, and Sector - Real Estate mutual funds typically invest in them. A REIT is required to pay out at least 90% of its income annually to avoid double taxation, and this technique makes securities in these funds high dividend players--almost bond-like in some cases--though their risk is similar to equities.
History of Fund/Manager
FREEX finds itself in the Franklin Templeton family, based out of San Mateo, CA. The Franklin Real Estate Security A made its debut in January of 1994 and FREEX has managed to accumulate roughly $331.18 million in assets, as of the most recently available information. The fund is currently managed by a team of investment professionals.
Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 8.58%, 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 4.3%, 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. Compared to the category average of 9.14%, the standard deviation of FREEX over the past three years is 12.64%. Looking at the past 5 years, the fund's standard deviation is 13.36% compared to the category average of 9.39%. This makes the fund more volatile than its peers over the past half-decade.
One cannot ignore the volatility of this segment, however, as it is always important for investors to remember the downside to any potential investment. In the most recent bear market, FREEX lost 65.35% and underperformed comparable funds by 1.45%. This might suggest that the fund is a worse choice than its peers during a bear market.
Even still, the fund has a 5-year beta of 0.52, so investors should note that 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. FREEX has generated a positive alpha over the past five years of 3.15, demonstrating that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.
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, FREEX is a load fund. It has an expense ratio of 1.11% compared to the category average of 1.23%. From a cost perspective, FREEX is actually cheaper than its peers.
Investors should also note that the minimum initial investment for the product is $1,000 and that each subsequent investment has no minimum amount.
Overall, Franklin Real Estate Security A ( FREEX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a somewhat weak choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the Sector - Real Estate, make sure to go to www.zacks.com/funds/mutual-funds for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.