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Is Kinetics Small Cap Opportunity No Load (KSCOX) a Strong Mutual Fund Pick Right Now?

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Global - Equity fund seekers should not consider taking a look at Kinetics Small Cap Opportunity No Load (KSCOX) at this time. KSCOX has a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We note that KSCOX 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

Kinetics is based in Sleepy Hollow, NY, and is the manager of KSCOX. Kinetics Small Cap Opportunity No Load debuted in February of 2003. Since then, KSCOX has accumulated assets of about $182.04 million, according to the most recently available information. The fund is currently managed by a team of investment professionals.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund in particular has delivered a 5-year annualized total return of 11.92%, 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 17.17%, 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. Over the past three years, KSCOX's standard deviation comes in at 16.11%, compared to the category average of 9.98%. Over the past 5 years, the standard deviation of the fund is 15.71% compared to the category average of 10.26%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should always remember the downsides to a potential investment, and this segment carries some risks one should be aware of. In the most recent bear market, KSCOX lost 67.05% and underperformed comparable funds by 14%. This means that the fund could possibly be a worse choice than its peers during a down market environment.

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. 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. KSCOX has generated a positive alpha over the past five years of 1.23, demonstrating that managers in this portfolio are skilled in picking 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, KSCOX is a no load fund. It has an expense ratio of 1.64% compared to the category average of 1.18%. So, KSCOX is actually more expensive than its peers from a cost perspective.

While the minimum initial investment for the product is $2,500, investors should also note that there is no minimum for each subsequent investment.

Bottom Line

Overall, Kinetics Small Cap Opportunity No Load ( KSCOX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, worse downside risk, and higher fees, Kinetics Small Cap Opportunity No Load ( KSCOX ) looks like a poor potential choice for investors right now.

For additional information on the Global - Equity area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into KSCOX too 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.

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