Wedgewood seeks to make investments in about 20-25 companies, with market capitalizations in excess of $5 billion, which it believes have above-average growth prospects… Unlike most growth investors, Wedgewood is not a momentum investor but rather a contrarian growth investor. Wedgewood is a firm that believes in investing as opposed to trading and generally experiences portfolio turnover of less than 50% annually.
So far, this strategy worked well for the fund:
Launched 3½ years ago, the fund’s three-year total return is 18.7%, besting the S&P 500 by 2.7 percentage points and putting it in the top 12% of Morningstar’s large-cap growth category.
The primary benchmark for the fund is the Russell 1000® Growth index. The fund beat the practical implementation of this index, the iShares Russell 1000 Growth ETF (IWF), by an annualized 2.57% over the last three years. In addition, the fund had a slightly lower volatility than the ETF, which, combined with superior returns, resulted in a higher Sharpe ratio.
Let’s take a look at the RiverPark/Wedgewood Retail fund’s performance from the Alpholio™ perspective. Here is a cumulative RealAlpha™ chart for the fund:
Since mid-2011, the fund has generated over 5.5% of annualized discounted RealAlpha™, while keeping its volatility close to 13%, slightly lower than that of its reference portfolio of ETFs. In addition, except for a slight “hiccup” in the second quarter of 2013, it kept producing RealAlpha™ in a consistent manner.
The following chart illustrates ETF weights in the reference portfolio over the same analysis period:
The fund had top equivalent positions in PowerShares QQQ ETF (QQQ; average weight of 45.1%), Vanguard Financials ETF (VFH; 18.0%), Vanguard Information Technology ETF (VGT; 10.5%), Vanguard Energy ETF (VDE; 6.6%), and iShares Global Tech ETF (IXN; 3.4%). Short-term investments of the fund were represented by the equivalent position in the iShares 1-3 Year Treasury Bond ETF (SHY; average weight of 12.4%).
The RiverPark/Wedgewood Retail fund is a great example of how a non-diversified fund can achieve outstanding risk-adjusted returns, while still keeping its volatility at a reasonable level. The fund’s total expense ratio of 1.05% (which includes a retail shareholder servicing fee of up 0.25%), coupled with tax efficiency thanks to relatively small distributions, also make it an attractive investment vehicle. The relatively short history of the fund is mitigated by more than 20 years of applying the same strategy to separately-managed accounts.
To learn more about the RiverPark/Wedgewood Retail and other mutual funds, please register on our website.