Any investors hoping to find a Large Cap Value fund might consider looking past American Century Equity Income Investor (TWEIX). TWEIX holds a Zacks Mutual Fund Rank of 4 (Sell), which is based on various forecasting factors like size, cost, and past performance.
Objective
TWEIX is one of many Large Cap Value mutual funds to choose from. These funds invest in equities with a market capitalization of $10 billion or more, but whose share prices do not reflect their intrinsic value. This strategy can often produce low P/E ratios and high dividend yields; however, growth levels are oftentimes cut back. These funds’ high growth opportunities are slowed even more since large-cap stocks are usually in more stable industries with low to moderate growth prospects. Thus, investors interested in a stable income stream find Large Cap Value funds very appealing.
History of Fund/Manager
TWEIX finds itself in the American Century family, based out of Kansas City, MO. American Century Equity Income Investor made its debut in August of 1994, and since then, TWEIX has accumulated about $2.77 billion in assets, per the most up-to-date date available. 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 carries a 5-year annualized total return of 7.92%, and is in the bottom third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 12.96%, 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. TWEIX’s standard deviation over the past three years is 9.89% compared to the category average of 11.17%. Looking at the past 5 years, the fund’s standard deviation is 11.54% compared to the category average of 13.08%. This makes the fund less volatile than its peers over the past half-decade.
Risk Factors
Investors should note that the fund has a 5-year beta of 0.55, 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. TWEIX has generated a negative alpha over the past five years of -1.01, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
