Generally, balanced funds stick to a relatively fixed proportion of stocks and bonds but may also ha...
Goldman Sachs Small Cap Value
06/21/2018 5:00 am EST
Inflation favors value stocks, especially small-cap value stocks. In line with our expectation of rising inflation, we’ve created a small-cap value category in our fund portfolio, explains John Persinos, editor of The Complete Investor.
Goldman Sachs Small Cap Value Insights A (GSATX) is a well-diversified fund, which holds nearly 350 stocks across all sectors, offers one-stop exposure to a broad assortment of small-cap value plays.
The fund avoids the pitfall of “top heaviness.” Even its top position has a weighting below 1%, so the fund’s performance won’t be disproportionately affected by a handful of top holdings.
If small-cap value stocks again outperform their larger peers as they have historically done in high-inflation periods, GSATX is a good bet to capture this outperformance.
The funds’ holdings have an average market cap of $1.6 billion and average price-to-book ratio of 1.6, both squarely in line with our small-cap value criteria. For comparison, our benchmark, the Russell 2000, has an average market cap above $2 billion and a P/B ratio of 2.4.
Over time GSATX has been one of the best-performing funds for the category. Its one-, three-, and five-year returns put it in the top 19th, 12th, and 18th percentiles, respectively, among peer funds.
Annual turnover is somewhat high at 138% vs. the category average of 84%, but despite the high trading activity the expense ratio of 1.25% is still below category average.
One reason is that GSATX charges a relatively low 0.25% rate for its 12b-1 fee, a fee that mutual funds commonly charge to cover distribution, marketing, and service costs. The typical rate ranges between 0.25% and 1%, so GSATX is on the low end of the range.
The fund charges a 5.5% load, but if you purchase it through major brokers such as Charles Schwab or TD Ameritrade, you should be able to get the load waived. Check with your broker. The minimum initial purchase is $1,000.
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