The Invesco American Franchise Fund: How Does It Measure Up?

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The Invesco American Franchise Fund: Overview

The Invesco American Franchise Fund – Class A (VAFAX) is the smallest fund, by asset size, chosen for this review. At the end of January 2016, it was managing assets worth $8.5 billion. As of December 2015, its assets were spread across 136 holdings and included stocks of Carnival (CCL), Dish Network (DISH), NXP Semiconductors (NXPI), Lowe’s Companies (LOW), and Sprint (S), which form a combined 12.5% of the fund’s assets.

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The Invesco American Franchise Fund’s performance

From a purely NAV (net asset value) return standpoint, the VAFAX fared badly in the one-year period ended February 12, 2016, standing 11th among the 12 funds of this review. It stood at the same ranking for January. However, 2015 was a bit better, with its returns placing it seventh in the peer group.

Other metrics

The VAFAX’s standard deviation, or the volatility of returns, in the one-year period ended February 12 amounted to 18.9%. This was higher than both the S&P 500’s 16.4% and the peer group’s average of 18.6%. The fund exhibited volatility in 2015 as well.

The fund’s risk-adjusted returns, calculated by the Sharpe ratio, amounted to -0.59, which meant that it was worse off than the S&P 500’s -0.47 for the one-year period ended February 12. For 2015, the fund’s risk-adjusted returns drove it to sixth place in the group of 12 funds.

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The information ratio, calculated with the S&P 500 as the benchmark, was -0.61 for the one-year period ended February 12. The information ratio measures the fund manager’s consistency and ability to generate excess returns over a benchmark. However, we can’t evaluate a negative information ratio. For 2015, the fund’s information ratio placed it as an above-average performer, but only by the smallest of the margins.

A note to investors

The VAFAX’s alpha was quite poor for the one-year period ended February 12, 2016, as it ranked 11th among 12 funds. For 2015, its risk-adjusted returns and alpha were both below average. The only quantitative measure that is slightly more favorable for the fund than its peers is its information ratio for 2015. However, that alone cannot establish enough confidence to make it a standout choice among its peers. For now, the fund’s performance places it among one of many offerings among large-cap funds. In the next article, we’ll look at the Vanguard Growth Index Fund – Investor Shares (VIGRX).

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