Is DFA US Small Cap Institutional (DFSTX) a Strong Mutual Fund Pick Right Now?
Having trouble finding a Small Cap Blend fund? DFA US Small Cap Institutional (DFSTX) is a potential starting point. DFSTX holds a Zacks Mutual Fund Rank of 2 (Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
We classify DFSTX 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.
History of Fund/Manager
Dimensional is based in Austin, TX, and is the manager of DFSTX. Since DFA US Small Cap Institutional made its debut in March of 1992, DFSTX has garnered more than $13.01 billion in assets. The fund's current manager is a team of investment professionals.
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 10.13%, and it sits 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 5.54%, which places it in the middle 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. Compared to the category average of 25.37%, the standard deviation of DFSTX over the past three years is 25.49%. The standard deviation of the fund over the past 5 years is 21.31% compared to the category average of 21.37%. 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. DFSTX has a 5-year beta of 1.26, 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. The fund has produced a negative alpha over the past 5 years of -6.93, which shows that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.
Holdings
Investigating 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.
Currently, this mutual fund is holding 97.06% stock in stocks, which have an average market capitalization of $2.83 billion. The fund has the heaviest exposure to the following market sectors:
Industrial Cyclical
Finance
Technology
Other
Turnover is about 4%, so those in charge of the fund make fewer trades than the average comparable fund.
Expenses
For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, DFSTX is a no load fund. It has an expense ratio of 0.37% compared to the category average of 1.08%. From a cost perspective, DFSTX is actually cheaper than its peers.
While the minimum initial investment for the product is $0, investors should also note that there is no minimum for each subsequent investment.
Bottom Line
Overall, DFA US Small Cap Institutional ( DFSTX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a great potential choice for investors right now.
For additional information on this product, or to compare it to other mutual funds in the Small Cap Blend, make sure to go to www.zacks.com/funds/mutual-funds for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.
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