A recent piece in Barron’s covers the AllianzGI NFJ Mid-Cap Value Fund (PQNAX; Class A shares). This $1.1 billion mid-cap value fund has a 5.50% maximum sales charge, 0.99% expense ratio and 45% turnover. According to the article
Over the past five years, the fund’s almost 15% return has beaten 89% of its rivals.
Two members of the fund’s current management team of four started in June 2009. Therefore, this analysis spans the interval from that month through the end of 2017.
The prospectus benchmark for the fund is the Russell Midcap® Value Index. One of the efficient implementations of this index is the iShares Russell Mid-Cap Value ETF (IWS). Alpholio™ calculations indicate that the fund returned more than the ETF in only 12% of all rolling 36-month periods, 19% of 24-month periods, and 35% of 12-month periods:
The median cumulative (not annualized) 36-month underpeformance of the fund vs. the ETF was 6.9%.
The rolling returns analysis focuses on relative returns over typical holding periods but ignores the fund’s volatility and exposures. To gain insight into the latter aspects, let’s employ Alpholio™’s patented methodology. In its simplest variant, the methodology constructs a fixed membership and weight reference ETF portfolio that most closely tracks periodic returns of the fund.
Here is the resulting chart of the cumulative RealAlpha™ for AllianzGI NFJ Mid-Cap Value (to learn more about this and other performance measures, please visit our FAQ):
To make the implementation practical, the number of ETFs in the reference portfolio was limited to six. Except for a brief period beginning in May 2017, the fund failed to outperform its reference portfolio of comparable volatility.
The following chart with statistics shows the constant composition of the reference ETF portfolio:
The fund had equivalent positions in the First Trust Large Cap Value AlphaDEX® Fund (FTA), First Trust Industrials/Producer Durables AlphaDEX® Fund (FXR), iShares U.S. Consumer Goods ETF (IYK), VanEck Vectors Agribusiness ETF (MOO), iShares MSCI Switzerland ETF (EWL), and Guggenheim S&P 500® Equal Weight Technology ETF (RYT). These ETFs represented average exposures generated by securities held by the fund.
The final chart with statistics depicts the cumulative total return of the fund and its benchmark ETF:
Despite a slightly higher volatility and downside deviation, the ETF had higher Sharpe and Sortino ratios than those of the fund.
In sum, under current management the AllianzGI NFJ Mid-Cap Value Fund underperformed its benchmark ETF and added little value over its reference ETF portfolio. The fund’s steep front load further diminished its appeal. In 2017, the fund had substantial long- and short-term capital distributions, which made it less suitable for taxable accounts.
To learn more about the Prudential AllianzGI NFJ Mid-Cap Value and other mutual funds, please register on our website.