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Is Federated MDT Small Cap Growth Fund A (QASGX) a Strong Mutual Fund Pick Right Now?

If investors are looking at the Small Cap Growth fund category, make sure to pass over Federated MDT Small Cap Growth Fund A (QASGX). QASGX bears a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

QASGX is part of the Small Cap Growth category, and this segment boasts an array of many other possible options. Small Cap Growth mutual funds usually focus their portfolios on stocks with large growth opportunities and a market cap of under $2 billion. These portfolios tend to feature small companies in up-and-coming industries and markets.

History of Fund/Manager

QASGX is a part of the Federated family of funds, a company based out of Pittsburgh, PA. Federated MDT Small Cap Growth Fund A debuted in September of 2005. Since then, QASGX has accumulated assets of about $135.81 million, according to the most recently available information. The fund is currently managed by a team of investment professionals.

Performance

Of course, investors look for strong performance in funds. QASGX has a 5-year annualized total return of 20.92% and is in the middle 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 15.11%, 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. Compared to the category average of 17.53%, the standard deviation of QASGX over the past three years is 26.97%. The fund's standard deviation over the past 5 years is 22.24% compared to the category average of 14.57%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

The fund has a 5-year beta of 1.33, so investors should note that it is hypothetically more volatile than the market at large. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. Over the past 5 years, the fund has a negative alpha of -0.25. This means 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, QASGX is a load fund. It has an expense ratio of 1.13% compared to the category average of 1.21%. Looking at the fund from a cost perspective, QASGX is actually cheaper than its peers.

Investors need to be aware that with this product, the minimum initial investment is $1,500; each subsequent investment needs to be at least $100.

Bottom Line

Overall, Federated MDT Small Cap Growth Fund A ( QASGX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, worse downside risk, and lower fees, Federated MDT Small Cap Growth Fund A ( QASGX ) looks like a somewhat weak choice for investors right now.

Your research on the Small Cap Growth segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.


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