PLGAX Slips in 2016 after a Superlative 2015



Principal LargeCap Growth Fund I performance

In this article, we’ll specifically outline the performance of the Principal LargeCap Growth Fund I – Class A (PLGAX), which is one of the classes available for retail investors. The fund is invested in stocks of companies like Express Scripts Holding Company (ESRX), Stericycle (SRCL), Charles Schwab (SCHW), Under Armour (UA), and Fastenal Company (FAST).

From a purely NAV (net asset value) return standpoint, PLGAX stood fourth 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 our 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.

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Other metrics

PLGAX’s standard deviation, or the volatility of returns, in the one-year period ended March 18 was 17.9%. This is higher than the S&P 500’s 16.7% but lower than 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 Sharpe Ratio for 2015 had placed the PLGAX second 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. Like 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 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 it second.

A note to investors

PLGAX had a great year in 2015, as its risk-adjusted returns, the consistency of returns, and alpha ranked it as the second-best fund in our peer group. The fund’s alpha has slipped a little, but it still placed it fourth among its peers in the one-year period ended March 18, 2016.

However, year-to-date 2016 has been difficult for the fund. Investors with a medium-term view may consider this fund as an option. Those already invested in the fund might wish to wait a bit more in order to see how the fund reacts to the volatile market conditions of 2016.

In the next article, we’ll look at the Wells Fargo Growth Fund – Class A (SGRAX).


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