Performance evaluation of ELGAX
On May 27, 2016, the Columbia Select Large Cap Growth Fund Class A (ELGAX) had fallen by 6.5% YTD (year-to-date) in 2016. This was the highest fall among the ten funds in this review.
We’ve graphed ELGAX’s performance against the PowerShares QQQ Trust, Series 1 ETF (QQQ) and the iShares Russell 1000 Growth ETF (IWF). Let’s look at what’s contributed to the fund’s surprisingly poor performance this year.
Portfolio composition and contribution to returns
The healthcare sector has proved to be unhealthy for ELGAX’s performance so far in 2016. Vertex Pharmaceuticals (VRTX), Illumina (ILMN), and Alexion Pharmaceuticals (ALXN) have driven down the sector’s returns, making it the biggest negative sectoral contributor in 2016 so far.
Edwards Lifesciences (EW) and Bristol-Myers Squibb (BMY) have contributed positively, but their combined contribution has been too small to have any material impact on the overall negative contribution.
Information technology has been another sizable negative contributor. LinkedIn (LNKD) and Fitbit (FIT) are the main detractors from the sector. Further negative contribution has been curtailed by positive contributions from Mercadolibre (MELI), Facebook (FB), and Salesforce.com (CRM).
The sole holding from industrials, Acuity Brands (AYI), has helped industrials to become ELGAX’s biggest positive contributor so far in the year. However, even after positive contributions from the materials, consumer staples, financials, and industrials sectors, the negative contributors have far outdone the positive ones.
Comparison with QQQ
We’ve compared the performance of the actively managed ELGAX with the passively managed QQQ. Though QQQ has been in negative territory so far in 2016, it has still beaten ELGAX hands down. Except for industrials and consumer staples, ELGAX underperformed in each sector in which both it and the QQQ invest.
The ELGAX doesn’t have anything working for it in 2016 so far. It’s defensively positioned, and its technology stock picks haven’t come through.
If the business cycle turns from here, the fund’s technology exposure may become useful. However, even this will depend on its stock picks, which have had a terrible 2016 so far. It’ll be interesting to see if the fund’s managers reduce its exposure to the healthcare sector going forward.
Let’s move on to the second fund in this review, the Fidelity Magellan Fund (FMAGX).