Is Federated Hermes Kaufmann Small Cap A a Strong Mutual Fund Pick Right Now?

If investors are looking at the Small Cap Growth fund category, make sure to pass over Federated Hermes Kaufmann Small Cap A FKASX. FKASX carries a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on various forecasting factors like size, cost, and past performance.

Objective

The world of Small Cap Growth funds is an area filled with options, such as FKASX. These funds tend to create their portfolios around stocks that sport large growth opportunities and market capitalization of less than $2 billion. The companies in these portfolios are usually on the smaller side, and are in up-and-coming industries and markets.

History of Fund/Manager

Federated is based in Pittsburgh, PA, and is the manager of FKASX. The Federated Hermes Kaufmann Small Cap A made its debut in December of 2002 and FKASX has managed to accumulate roughly $778.53 million in assets, as of the most recently available information. The fund's current manager is a team of investment professionals.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund has delivered a 5-year annualized total return of 6.3%, and is in the bottom third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3 -year annualized total return of -5.26%, which places it in the bottom third during this time-frame.

It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. FKASX's standard deviation over the past three years is 21.72% compared to the category average of 15.77%. The standard deviation of the fund over the past 5 years is 22.91% compared to the category average of 16.92%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

With a 5-year beta of 1.06, the fund is likely to be more volatile than the market average. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. The fund has produced a negative alpha over the past 5 years of -7.62, which shows that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Examining the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is primarily on equities that are traded in the United States.

Currently, this mutual fund is holding 87.16% in stocks, which have an average market capitalization of $9.57 billion. The fund has the heaviest exposure to the following market sectors:

• Health
• Finance
• Technology

This fund's turnover is about 31%, so the fund managers are making fewer trades than the average comparable fund.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, FKASX is a load fund. It has an expense ratio of 0.15% compared to the category average of 1%. Looking at the fund from a cost perspective, FKASX is actually cheaper than its peers.

Investors need to be aware that with this product, the minimum initial investment is $1,500; each subsequent investment needs to be at least $100.

Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.

Bottom Line

Overall, Federated Hermes Kaufmann Small Cap A ( FKASX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, worse downside risk, and lower fees, Federated Hermes Kaufmann Small Cap A ( FKASX ) looks like a somewhat weak choice for investors right now.

This could just be the start of your research on FKASXin the Small Cap Growth category.

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