A recent blog post on Barron’s refers to a Dow Jones Newswires analysis of the Amana Income mutual fund. The post states that

“The returns have reflected the blockbuster success of staid sectors over the last 15 or so years. Per Nish, the Amana Income fund is up 12.48% on a 10-year annualized basis, far outstripping the S&P 500. The prohibition on financial stocks was a big boost during the financial crisis, although it hurt during that sector’s steep rise during 2009-10.”

Let’s take a look at the fund’s performance through the Alpholio™ lens. Here is a cumulative RealAlpha™ chart for the fund:

Cumulative RealAlpha™ for AMANX

The chart shows three distinct phases in the fund’s performance in the past eight years:

  • From early 2005 to early 2008, the fund generated positive increments of RealAlpha™
  • In 2008 and 2009, the fund exhibited a substantial decline in cumulative RealAlpha™, followed by a recovery to approximately the previous peak level
  • From 2010 onwards, the fund’s cumulative RealAlpha™ stayed roughly flat.

Interestingly enough, in the first phase, the lag cumulative RealAlpha™ of the fund was below the regular one. This implies that in the fund’s management attempted new investment ideas that substantially differed from those in the prior sub-periods; however, these attempts were largely unsuccessful in generating more RealAlpha™.

The overall Alpholio™ statistics of the fund are unimpressive:

AMANX Statistics

The annualized volatility of fund’s returns in the entire analysis period was much lower than that of the market, which was also reflected in the commendable RealBeta™ of about 0.77. However, in the last three years, the fund’s returns mostly failed to beat the returns of a reference portfolio of exchange-traded products (ETPs) that also had a slightly lower risk level. While this flat cumulative RealAlpha™ trend may not continue in the future, so far there is no strong indication that it will be broken. If it happens, Alpholio™ methodology will generate a buy signal on the fund.

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