Why the Columbia Select Large Cap Growth Fund May Not Fuel Interest


Mar. 25 2016, Updated 12:07 p.m. ET

Columbia Select Large Cap Growth Fund performance

In this article, we’ll specifically outline the performance of the Columbia Select Large Cap Growth Fund – Class A (ELGAX), which is one of the classes available for retail investors. The fund is invested in the stocks of companies such as Splunk (SPLK), Mercadolibre (MELI), Intercontinental Exchange (ICE), Tesla Motors (TSLA), and Acuity Brands (AYI).

From a purely NAV (net asset value) return standpoint, ELGAX was the worst performer for the one-year period ended March 18, 2016, among its peer group. When we refer to the peer group, we mean the group of 12 funds chosen for this review. For the comparison of returns, we have chosen two ETFs: the Vanguard 500 ETF (VOO) and the iShares Russell 1000 Growth ETF (IWF).

For evaluating benchmark-related metrics, we’ve chosen the S&P 500 as the benchmark for all funds in this review, which VOO tracks.

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Other metrics

ELGAX’s standard deviation, or the volatility of returns, in the one-year period ended March 18 was 22.5%. This is much higher than both the S&P 500’s 16.7% and the peer group’s average of 18.4%.

The fund’s risk-adjusted returns, calculated via the Sharpe Ratio, were negative for the one-year period ended March 18. Evaluating a negative Sharpe Ratio may be misleading, so we’ll avoid that. The ratio for 2015 had placed ELGAX sixth among its peers.

The information ratio, calculated with the S&P 500 as the benchmark, was negative for the one-year period ended March 18. As with the Sharpe Ratio, we can’t evaluate a negative information ratio. The information ratio shows the consistency of a fund manager along with measuring the manager’s ability to generate excess returns over a benchmark. The higher the reading, the better the consistency. For 2015, the fund’s information ratio ranked it eighth.

A note to investors

Unlike the Sharpe and the information ratios, we can analyze a negative Jensen’s alpha. The fund’s alpha was the most negative among its peers for the one-year period ended March 18, 2016. This was much better for the fund from alpha’s perspective, as it stood third among its peers.

The fund’s high volatility is a matter of concern and its focused strategy may not appeal to all, especially those who want a broad-based exposure. Current investors with a short-term outlook may need to look at rebalancing their investment.

In the next article, we’ll look at the Fidelity Magellan Fund (FMAGX).


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