Is Hodges Small Cap Fund Institutional Class (HDSIX) a Strong Mutual Fund Pick Right Now?

Any investors hoping to find a Small Cap Blend fund could think about starting with Hodges Small Cap Fund Institutional Class (HDSIX). HDSIX has a Zacks Mutual Fund Rank of 3 (Hold), which is based on various forecasting factors like size, cost, and past performance.

We classify HDSIX in the Small Cap Blend category, an area rife with potential choices. Small Cap Blend mutual funds usually target companies with a market capitalization of less than $2 billion. A small-cap blend mutual fund allows investors to diversify their funds among various types of small-cap stocks, which can help reduce the volatility inherent in lower market cap companies.

Hodges Capital is based in Dallas, TX, and is the manager of HDSIX. Since Hodges Small Cap Fund Institutional Class made its debut in December of 2008, HDSIX has garnered more than $34.11 million in assets. A team of investment professionals is the fund’s current manager.

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 16.07%, 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 4.13%, 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 17.67%, the standard deviation of HDSIX over the past three years is 27.41%. The fund’s standard deviation over the past 5 years is 25.07% compared to the category average of 17.05%. This makes the fund more volatile than its peers over the past half-decade.

Investors should note that the fund has a 5-year beta of 1.26, so it is likely going to be more volatile than the market at large. 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. Over the past 5 years, the fund has a negative alpha of -1.61. This means that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.