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Is Franklin Real Estate Security A (FREEX) a Strong Mutual Fund Pick Right Now?

Zacks Equity Research

If you've been stuck searching for Sector - Real Estate funds, consider Franklin Real Estate Security A (FREEX) as a possibility. FREEX has a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

Zacks categorizes FREEX in Sector - Real Estate, which is a segment packed with options. Real estate investment trusts (REITs) are a popular income vehicle thanks their taxation rules, and Sector - Real Estate mutual funds typically invest in them. A REIT is required to pay out at least 90% of its income annually to avoid double taxation, and this technique makes securities in these funds high dividend players--almost bond-like in some cases--though their risk is similar to equities.

History of Fund/Manager

Franklin Templeton is based in San Mateo, CA, and is the manager of FREEX. Since Franklin Real Estate Security A made its debut in January of 1994, FREEX has garnered more than $350.25 million in assets. The fund's current manager, Daniel Scher, has been in charge of the fund since May of 2014.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund in particular has delivered a 5-year annualized total return of 7.21%, and it sits in the top third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 10.1%, which places it in the middle third during this time-frame.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Over the past three years, FREEX's standard deviation comes in at 12.16%, compared to the category average of 10.1%. Over the past 5 years, the standard deviation of the fund is 13.62% compared to the category average of 10.38%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should always remember the downsides to a potential investment, and this segment carries some risks one should be aware of. FREEX lost 65.34% in the most recent bear market and underperformed comparable funds by 1%. This means that the fund could possibly be a worse choice than its peers during a down market environment.

Nevertheless, with a 5-year beta of 0.53, the fund is likely to be less volatile than the market average. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. FREEX's 5-year performance has produced a positive alpha of 1.53, which means managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, FREEX is a load fund. It has an expense ratio of 1.01% compared to the category average of 1.29%. From a cost perspective, FREEX is actually cheaper than its peers.

While the minimum initial investment for the product is $1,000, investors should also note that there is no minimum for each subsequent investment.

Bottom Line

Overall, Franklin Real Estate Security A ( FREEX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Franklin Real Estate Security A ( FREEX ) looks like a good potential choice for investors right now.

Your research on the Sector - Real Estate segment doesn't have to stop here. You can check out all the great mutual fund tools we have to offer by going to www.zacks.com/funds/mutual-funds to see the additional features we offer as well for additional information. For analysis of the rest of your portfolio, make sure to visit Zacks.com for our full suite of tools which will help you investigate all of your stocks and funds in one place.


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