Is Virtus KAR Small Cap Sustain Growth A (PSGAX) a Strong Mutual Fund Pick Right Now?

Small Cap Growth fund seekers should not consider taking a look at Virtus KAR Small Cap Sustain Growth A (PSGAX) at this time. PSGAX bears a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on various forecasting factors like size, cost, and past performance.

Objective

PSGAX is one of many different Small Cap Growth funds to choose from. Small Cap Growth mutual funds build portfolios around stocks with market caps under $2 billion and large growth opportunities. Additionally, these portfolios typically highlight smaller companies in promising markets and industries.

History of Fund/Manager

Virtus Funds is responsible for PSGAX, and the company is based out of Hartford, CT. Virtus KAR Small Cap Sustain Growth A made its debut in June of 2006, and since then, PSGAX has accumulated about $199.43 million in assets, per the most up-to-date date available. A team of investment professionals is the fund's current manager.

Performance

Investors naturally seek funds with strong performance. This fund has delivered a 5-year annualized total return of -5.8%, and it sits in the bottom 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 -3.43%, which places it in the bottom third during this time-frame.

It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

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. PSGAX's standard deviation over the past three years is 18.5% compared to the category average of 13.27%. Looking at the past 5 years, the fund's standard deviation is 19.82% compared to the category average of 14.57%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. PSGAX has a 5-year beta of 0.96, which means it is likely to be less volatile than the market average. 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. The fund has produced a negative alpha over the past 5 years of -17.22, which shows that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

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, PSGAX is a load fund and it has an expense ratio of 1.39%.

While the minimum initial investment for the product is $2,500, investors should also note that each subsequent investment needs to be at least $100.

Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.

Bottom Line

With a 'strong sell' rank, Virtus KAR Small Cap Sustain Growth A is in the bottom 20% of all mutual funds we cover. This means that our models suggest it is one of the worst options for investors in Small Cap Growth right now, though this could change if the performance of the fund and the Zacks Ranks of the equities in PSGAX turnaround in the next data release.

For additional information on the Small Cap Growth 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 PSGAX too for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.

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