Is T. Rowe Price Institutional Mid-Cap Equity Growth (PMEGX) a Strong Mutual Fund Pick Right Now?
Having trouble finding a Mid Cap Growth fund? T. Rowe Price Institutional Mid-Cap Equity Growth (PMEGX) is a potential starting point. PMEGX possesses a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
We note that PMEGX is a Mid Cap Growth fund, and this area is also loaded with many different options. Companies are usually considered growth stocks when they consistently report notable sales and/or earnings growth. Thus, Mid Cap Growth funds pick stocks--usually companies with a market cap between $2 billion and $10 billion--that demonstrate extensive growth opportunities for investors compared to their peers.
History of Fund/Manager
T. Rowe Price is based in Baltimore, MD, and is the manager of PMEGX. T. Rowe Price Institutional Mid-Cap Equity Growth debuted in July of 1996. Since then, PMEGX has accumulated assets of about $7.79 billion, according to the most recently available information. Brian W. H. Berghuis is the fund's current manager and has held that role since July of 1996.
Performance
Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of 17.56%, and it sits in the middle third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 16.89%, which places it in the bottom 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, PMEGX's standard deviation comes in at 21.2%, compared to the category average of 22.67%. Looking at the past 5 years, the fund's standard deviation is 17.12% compared to the category average of 18.5%. This makes the fund less volatile than its peers over the past half-decade.
Risk Factors
Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. PMEGX has a 5-year beta of 1.09, which means it is likely to be more volatile than the market average. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. PMEGX's 5-year performance has produced a positive alpha of 0.13, which means managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.
Holdings
Examining the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is principally on equities that are traded in the United States.
The mutual fund currently has 75.19% of its holdings in stocks, with an average market capitalization of $21.80 billion. The fund has the heaviest exposure to the following market sectors:
Technology
Industrial Cyclical
Health
Retail Trade
With turnover at about 25.3%, this fund is making fewer trades than the average comparable fund.
Expenses
As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, PMEGX is a no load fund. It has an expense ratio of 0.61% compared to the category average of 1.18%. Looking at the fund from a cost perspective, PMEGX is actually cheaper than its peers.
This fund requires a minimum initial investment of $1 million, while there is no minimum for each subsequent investment.
Bottom Line
Overall, T. Rowe Price Institutional Mid-Cap Equity Growth ( PMEGX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, T. Rowe Price Institutional Mid-Cap Equity Growth ( PMEGX ) looks like a great potential choice for investors right now.
This could just be the start of your research on PMEGXin the Mid Cap Growth category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. If you are more of a stock investor, make sure to also check out our Zacks Rank, and our full suite of tools we have available for novice and professional investors alike.
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