If you have been looking for Sector – Tech funds, it would not be wise to start your search with BlackRock Science & Technology Opportunities A (BGSAX). BGSAX bears a Zacks Mutual Fund Rank of 4 (Sell), which is based on various forecasting factors like size, cost, and past performance.
Objective
The world of Sector – Tech funds is an area filled with options, and BGSAX is one of them. Sector – Tech mutual funds allow investors to own a stake in a notoriously volatile sector with a much more diversified approach. Tech companies can be in any number of industries such as semiconductors, software, internet, networking just to name a few.
History of Fund/Manager
BlackRock is based in New York, NY, and is the manager of BGSAX. The BlackRock Science & Technology Opportunities A made its debut in May of 2000 and BGSAX has managed to accumulate roughly $3.35 billion in assets, as of the most recently available information. The fund is currently managed by Tony Kim who has been in charge of the fund since June of 2013.
Performance
Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund carries a 5-year annualized total return of 14.43%, and is in the middle third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 36.55%, which places it in the middle third during this time-frame.
It is important to note that the product’s returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund’s [%] sale charge. If sales charges were included, total returns would have been lower.
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. Compared to the category average of 12.42%, the standard deviation of BGSAX over the past three years is 24.17%. The fund’s standard deviation over the past 5 years is 25.98% compared to the category average of 14.42%. This makes the fund more 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. BGSAX has a 5-year beta of 1.44, which means it is likely to be more 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. With a negative alpha of -1.22, managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
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, BGSAX is a load fund. It has an expense ratio of 1.17% compared to the category average of 0.97%. BGSAX is actually more expensive than its peers when you consider factors like cost.
While the minimum initial investment for the product is $1,000, investors should also note that each subsequent investment needs to be at least $50.
Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.
Bottom Line
Overall, BlackRock Science & Technology Opportunities A ( BGSAX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, worse downside risk, and higher fees, this fund looks like a somewhat weak choice for investors right now.
Your research on the Sector – Tech 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. 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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This article originally published on Zacks Investment Research (zacks.com).