There are plenty of choices in the Mutual Fund Equity Report category, but where should you start your research? Well, one fund that may not be worth investigating is American Funds EuroPacific Growth R5 (RERFX). RERFX carries a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on nine forecasting factors like size, cost, and past performance.
History of Fund/Manager
American Funds is based in Los Angeles, CA, and is the manager of RERFX. American Funds EuroPacific Growth R5 made its debut in November of 2002, and since then, RERFX has accumulated about $3.71 billion in assets, per the most up-to-date date available. The fund is currently managed by a team of investment professionals.
Investors naturally seek funds with strong performance. This fund in particular has delivered a 5-year annualized total return of 1.49%, and it sits 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 -0.2%, which places it in the middle third during this time-frame.
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. Compared to the category average of 17.27%, the standard deviation of RERFX over the past three years is 21.48%. The standard deviation of the fund over the past 5 years is 18.77% compared to the category average of 15.07%. This makes the fund more volatile than its peers over the past half-decade.
Investors should note that the fund has a 5-year beta of 0.9, so it is likely going to be less volatile than the market at large. 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 -6.36, which shows that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
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, RERFX is a no load fund. It has an expense ratio of 0.51% compared to the category average of 1.15%. RERFX is actually cheaper than its peers when you consider factors like cost.
Investors need to be aware that with this product, the minimum initial investment is $250; each subsequent investment needs to be at least $50.
Overall, American Funds EuroPacific Growth R5 ( RERFX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, average downside risk, and lower fees, American Funds EuroPacific Growth R5 ( RERFX ) looks like a somewhat weak choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the Mutual Fund Equity Report, make sure to go to www.zacks.com/funds/mutual-funds for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.
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