What Explains the Columbia Select Large Cap Growth Fund’s Poor Showing?
The short-term performance of the Columbia Select Large Cap Growth Fund – Class A (ELGAX) is excellent, and the past six months have been great for the fund.
Sept. 1 2016, Updated 10:04 a.m. ET
Performance evaluation of the Columbia Select Large Cap Growth Fund
The short-term performance of the Columbia Select Large Cap Growth Fund – Class A (ELGAX) is excellent, and the past six months have been great for the fund. However, it is the only fund in this review that is in the red in 2016 year-to-date (or YTD) through August 26.
Even for the one-year period, the fund is second to last in its peer group of 12 funds. We have graphed its performance against two ETFs: the iShares S&P 500 Growth ETF (IVW) and the iShares Russell 1000 Growth ETF (IWF). Let’s look at what has contributed to this poor performance by the fund during the year so far.
Contribution to returns
The healthcare sector has been the prime detractor to ELGAX in 2016 YTD. Alexion Pharmaceuticals (ALXN) and Vertex Pharmaceuticals (VRTX) have led the decliners from the sector, which includes Novartis AG (NVS).
Had it not been for the sizable positive contribution from Edwards Lifesciences (EW), Intercept Pharmaceuticals (ICPT), and DexCom (DXCM), the sector would have dragged the fund even deeper into negative territory.
The information technology sector has been primarily responsible for reducing the drag on the fund, which was created by the healthcare sector. Until May 2016, the IT sector was also a detractor, but it has turned the corner since then.
Mercadolibre (MELI) has been the highest gainer in the information technology sector, followed by Alibaba (BABA) and Facebook (FB). However, the sector was held back by negative contributions from Fitbit (FIT), LinkedIn (LNKD), and ServiceNow (NOW).
The consumer discretionary sector has also emerged as a sizable positive factor due to contributions from Amazon (AMZN) and Priceline (PCLN).
Investor takeaways
In YTD 2016, ELGAX has endured some rough weather. The fund hasn’t presented any competition for the SPDR S&P 500 Trust ETF (SPY), which we are using as a benchmark for all the funds in this review.
However, the past six months have been much better. If the tech sector keeps going strong, investors in the fund may be in for some good news. At the same time, a turnaround in the business cycle may hold back the fund, given its strikingly high healthcare exposure.
Let’s move on to the second fund in this review: the Fidelity Magellan Fund (FMAGX).