Today’s piece in Barron’s profiles the Glenmede Large Cap Core Fund (GTLOX) and the Glenmede Large Cap Growth Fund (GTLLX). This post will focus on the former fund. This $1.6 billion no-load fund sports a relatively low 0.87% expense ratio and has a 73% turnover. According to the article
The Large Cap Core fund has edged out the Standard & Poor’s 500 in eight of the past 10 calendar years; its returns nearly matched the index’s in the other years. Its average annual return of 8.8% over the past decade beats 96% of its large-blend peers.
However, the prospectus benchmark for the fund is not the S&P 500® Index but the Russell 1000® Index. One of the accessible implementations of the latter is the iShares Russell 1000 ETF (IWB). Alpholio™’s calculations show that since inception the fund returned more than the ETF in about 80% of all rolling 36-month periods, 79% of 24-month periods and 71% of 12-month periods.
A single index does not fully account for the fund’s risk. In one variant of Alpholio™’s patented methodology, the fund’s performance is compared to that of a dynamic reference ETF portfolio with fixed membership and variable weights. Here is a chart of the resulting cumulative RealAlpha™ for Glenmede Large Cap Core:
The fund did not generate any appreciable RealAlpha™ from late 2004 through the third quarter of 2012. The fund added almost all of the value in a relatively short period from the fourth quarter of 2012 through the end of 2014. Given this delay, the overall regular and lag annualized discounted RealAlpha™ measures for the fund were only around 0.7% (to learn more about RealAlpha™, please visit our FAQ). At 15.8%, the fund’s standard deviation was slightly higher than that of the reference ETF portfolio. The fund’s RealBeta™ was approximately 1.05. (An analysis of the fund using a reference ETF portfolio with both fixed membership and weights produced similar results.)
The following chart shows changes of ETF weights in the reference portfolio for the fund over the same evaluation period:
The fund had top equivalent positions in the iShares S&P 500 Growth ETF (IVW; average weight of 26.3%), PowerShares Dynamic Market Portfolio (PWC; 17.7%), iShares Morningstar Mid-Cap ETF (JKG; 16.2%), Vanguard Financials ETF (VFH; 10.0%), iShares Morningstar Mid-Cap Growth ETF (JKH; 6.2%), and Vanguard Energy ETF (VDE; 5.9%). The Other component in the chart collectively represents additional six equity ETFs with smaller average weights.
The above findings illustrate how a fund’s annualized three-, five- and ten-year returns (and the corresponding ratings) can be heavily influenced by a short burst of recent outperformance. For most of the Glenmede Large Cap Core fund’s existence, investors realized little benefit on truly risk-adjusted basis. Only time will tell if the fund continues to add value in the future; so far in 2015, the cumulative RealAlpha™ curve is rather flat.
Despite having a substantial turnover, historically the fund managed to limit its capital gain and dividend distributions, which may make it suitable even for taxable accounts. The lack of a front sales charge and a comparably low expense ratio certainly enhance the fund’s appeal.
To learn more about the Glenmede Large Cap Core and other mutual funds, please register on our website.