If you have been looking for Large Cap Blend funds, it would not be wise to start your search with Diamond Hill Large Cap Fund A (DHLAX). DHLAX possesses a Zacks Mutual Fund Rank of 4 (Sell), which is based on various forecasting factors like size, cost, and past performance.
DHLAX is part of the Large Cap Blend section, an area that boasts an array of many possible options. Large Cap Blend mutual funds most often invest in firms with a market capitalization of $10 billion or more. By investing in bigger companies, these funds offer more stability, and are often well-suited for investors with a ‘buy and hold’ mindset. Blended funds mix large, established companies into their holdings, which gives investors exposure to both value and growth at the same time.
Diamond Hill is based in Columbus, OH, and is the manager of DHLAX. Diamond Hill Large Cap Fund A debuted in July of 2001. Since then, DHLAX has accumulated assets of about $274.00 million, according to the most recently available information. The fund is currently managed by Austin Hawley who has been in charge of the fund since February of 2015.
Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 10.38%, and it sits 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 13.49%, which places it in the middle 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. The standard deviation of DHLAX over the past three years is 15.11% compared to the category average of 12.89%. The standard deviation of the fund over the past 5 years is 16.63% compared to the category average of 13.32%. This makes the fund more volatile than its peers over the past half-decade.
Investors should note that the fund has a 5-year beta of 0.93, so it is likely going to be 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. Over the past 5 years, the fund has a negative alpha of -4.28. This means that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
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, DHLAX is a no load fund. It has an expense ratio of 0.96% compared to the category average of 0.92%. From a cost perspective, DHLAX is actually more expensive than its peers.
While the minimum initial investment for the product is $2,500, investors should also note that there is no minimum for each subsequent investment.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Overall, Diamond Hill Large Cap Fund A ( DHLAX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and higher fees, this fund looks like a poor potential choice for investors right now.
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This article originally published on Zacks Investment Research (zacks.com).