Options for Investors in the Vanguard Capital Opportunity Fund



Vanguard Capital Opportunity Fund performance

In this article, we’ll specifically outline the performance of the Vanguard Capital Opportunity Fund – Investor Shares (VHCOX). The fund is invested in stocks of companies like United Continental Holdings (UAL), Qiagen NV (QGEN), SanDisk (SNDK), NetApp (NTAP), and Airbus Group SE (EADSY).

From a purely NAV (net asset value) return standpoint, the Vanguard Capital Opportunity Fund has had a forgettable one-year period until March 18, 2016, as it stood tenth among its peer group. When we refer to the peer group, we mean the group of 12 funds chosen for this review. For return comparison, 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.

Other metrics

VHCOX’s standard deviation, or the volatility of returns, in the one-year period until March 18 was 19.2%. This is much higher than both, the S&P 500’s 16.7% as well as 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 the VHCOX ninth among its peers.

The information ratio, calculated with the S&P 500 as the benchmark (in order to maintain parity), 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 his or her ability to generate excess returns over a benchmark. The higher the reading, the better the consistency. For 2015, the fund’s information ratio had ranked tenth.

A note to investors

Along with the Sharpe and information ratios, the VHCOX’s alpha was below average for 2015. The situation was similar in the one-year period ended March 18, 2016, with the fund’s alpha finding a place among the bottom three funds. The fund is closed to new investors. For current investors, the fund has a medium- to long-term horizon. If your investment horizon matches this, then remaining invested makes sense. However, if the fund’s mid-cap focus is not comfortable to you and you’re nearing the end of your investment horizon, then you may consider the possibility of liquidating.

In the next article, we’ll look at the JPMorgan Growth Advantage Fund – Class A (VHIAX).

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