MOST AGGRESSIVE GROWTH MUTUAL FUNDS
A fund which invests with the objective of maximizing capital gains by riding a market trend is termed an “aggressive growth mutual fund”. Typically, such funds have a higher expense and turnover ratio (loosely put this means the number of times the portfolio is churned during a given period).
To achieve this objective, funds adopt different approaches to investing like identifying sectors which are in flavor, or geographies having high growth potential or investing in high profile initial public offers for generating high returns in the short term.
The top three most aggressive international mutual funds in the current year, ranked in terms of absolute year-to-date returns till August 24, 2009, are analysed below- Interestingly all the three funds are from BRIC ( the fancied markets of Brazil, Russia, India and China) region.
ProFunds UltraLatin America Inv (UBPIX)- The year-to-date (YTD) return of this fund belonging to the Latin America Stock category and following the Large Blend Style is 122.11%. Its assets stand at $43.7 million, out of which 71.3% is in stocks and the balance in cash. Its 52-week NAV has fluctuated in the range of $2.38-$23.86. Its NAV on August 24, 2009 was $8.84. Its top five holdings, accounting for 31% of its assets, include Petroleo Brasileiro S.A.(NYSE Symbol-PBR.A), Petroleo Brasileiro ADR (NYSE Symbol-PBR), Vale ADR (NYSE- VALE), Vale S.A. (OTC-RIODF)and Itau Unibanco Holding S.A. ADR (NYSE-ITUB). A no-load fund, its expenses are at 1.66% and its turnover ratio is an astounding 685%. The minimum initial investment required is $15,000.
Direxion Latin America Bull 2X Inv (DXZLX)- The year-to-date return of this fund also belonging to the Latin America Stock category is 108.74%. Its total assets are worth $84.8 million, out of which 83.3% is in stocks (Long Equity Swap contracts of S & P Latin America 40 share index) and the balance in Goldman Sachs Financial Square Government Fund (a money market fund). Its 52-week NAV moved in the $12.30-$126.70 range. Its NAV on August 24, 2009 was $40.62. Its expenses are at 1.75% and its turnover ratio is at 120%. The minimum initial investment required is $25,000.
JPMorgan Russia A (JRUAX)- The year-to-date return of this fund belonging to the Europe Stock category is 102.68%. Its total assets are worth $16.1 million, out of which 99.6% is in stocks. Its 52-week NAV moved in the $3.37-$15.13 range. Its NAV on August 24, 2009 was $8.33. Its top holdings include Sberbank Rossii OAO (OTC-SBRBF), JSFC Sistema GDR, Mobile Telesystems ADR (NYSE-MBT), MMC Norilsk Nickel ADR (OTC-NILSY), OAO Tatneft GDR. Its expenses are at 2.02% and its turnover ratio is 76%.
Ideally, only investors who are willing to take the volatility risks associated with mutual funds seeking absolute returns should consider investing in these funds. Since the returns generated by these funds are subject to high incidence of expenses, transaction cost and taxes on short term capital gains (their focus is largely on short term performance) the actual gains accruing to investors do get considerably diluted when compared to the fund’s market performance. It is also to be noted that in adverse market conditions, these funds get clobbered badly because the high beta stocks they normally invest in are prone to bigger price corrections than their benchmark indices.