Best And Worst Q2 2019: Large Cap Blend ETFs And Mutual Funds

The Large Cap Blend style ranks first out of the twelve fund styles as detailed in our Q2’19 Style Ratings for ETFs and Mutual Funds report. Last quarter, the Large Cap Blend style ranked first as well. It gets our Very Attractive rating, which is based on an aggregation of ratings of 82 ETFs and 746 mutual funds in the Large Cap Blend style. See a recap of our Q1’19 Style Ratings here.

Figures 1 and 2 show the five best and worst rated ETFs and mutual funds in the style. Not all Large Cap Blend style ETFs and mutual funds are created the same. The number of holdings varies widely (from 10 to 1633). This variation creates drastically different investment implications and, therefore, ratings.

Investors seeking exposure to the Large Cap Blend style should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2.

Our Robo-Analyst technology^[1] empowers our unique ETF and mutual fund rating methodology, which leverages our rigorous analysis of each fund’s holdings.^[2] We think advisors and investors focused on prudent investment decisions should include analysis of fund holdings in their research process for ETFs and mutual funds.

Figure 1: ETFs with the Best & Worst Ratings – Top 5

* Best ETFs exclude ETFs with TNA less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

First Trust Dow 30 Equal Weight ETF (EDOW) and Reality Shares DIVCON Leaders Dividend ETF (LEAD) are excluded from Figure 1 because their total net assets (TNA) are below $100 million and do not meet our liquidity minimums.

Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5

* Best mutual funds exclude funds with TNA less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

Asset Management Large Cap Equity Fund (IICHX) is excluded from Figure 2 because its TNA are below $100 million and do not meet our liquidity minimums.

Chaikin U.S. Large Cap ETF (CLRG) is the top-rated Large Cap Blend ETF and Steward International Exchange Index Fund (SNTFX) is the top-rated Large Cap Blend mutual fund. Both earn a Very Attractive rating.

Principal Sustainable Momentum Index ETF (PMOM) is the worst rated Large Cap Blend ETF and MSS Series Footprints Discover Value Fund (DVALX) is the worst rated Large Cap Blend mutual fund. PMOM earns an Unattractive rating and DVALX earns a Very Unattractive rating.

The Danger Within

Buying a fund without analyzing its holdings is like buying a stock without analyzing its business and finances. Put another way, research on fund holdings is necessary due diligence because a fund’s performance is only as good as its holdings’ performance. Don’t just take our word for it, see what Barron’s says on this matter.

PERFORMANCE OF HOLDINGs = PERFORMANCE OF FUND

Analyzing each holding within funds is no small task. Our Robo-Analyst technology enables us to perform this diligence with scale and provide the research needed to fulfill the fiduciary duty of care. More of the biggest names in the financial industry (see At BlackRock, Machines Are Rising Over Managers to Pick Stocks) are now embracing technology to leverage machines in the investment research process. Technology may be the only solution to the dual mandate for research: cut costs and fulfill the fiduciary duty of care. Investors, clients, advisors and analysts deserve the latest in technology to get the diligence required to make prudent investment decisions.

Figures 3 and 4 show the rating landscape of all Large Cap Blend ETFs and mutual funds.

Figure 3: Separating the Best ETFs from the Worst Funds

Sources: New Constructs, LLC and company filings

Figure 4: Separating the Best Mutual Funds from the Worst Funds

Sources: New Constructs, LLC and company filings

This article originally published on April 23, 2019.

Disclosure: David Trainer and Kyle Guske II receive no compensation to write about any specific stock, style, or theme.

^[1]Harvard Business School features the powerful impact of our research automation technology in the case New Constructs: Disrupting Fundamental Analysis with Robo-Analysts.

^[2]Ernst & Young’s recent white paper “Getting ROIC Right” proves the superiority of our holdings research and analytics.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.