Is Franklin Real Estate Security A (FREEX) a Strong Mutual Fund Pick Right Now?

·4-min read

Any investors hoping to find a Sector - Real Estate fund might consider looking past Franklin Real Estate Security A (FREEX). FREEX holds a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

FREEX is one of many Sector - Real Estate funds to choose from. Sector - Real Estate mutual funds are known to invest in real estate investment trusts (REITs). A popular income vehicle thanks to its taxation rules, a REIT is required to pay out at least 90% of its income annually to avoid double taxation. This technique makes securities in these funds high dividend players, and even bond-like in some instances, though their risk is similar to equities.

History of Fund/Manager

Franklin Templeton is responsible for FREEX, and the company is based out of San Mateo, CA. Since Franklin Real Estate Security A made its debut in January of 1994, FREEX has garnered more than $329.68 million in assets. The fund's current manager, Daniel Scher, has been in charge of the fund since May of 2014.

Performance

Of course, investors look for strong performance in funds. FREEX has a 5-year annualized total return of 7.57% and is in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 12.44%, which places it in the top 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. FREEX's standard deviation over the past three years is 17.2% compared to the category average of 15.87%. Over the past 5 years, the standard deviation of the fund is 15.31% compared to the category average of 13.28%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

The fund has a 5-year beta of 0.72, so investors should note that it is hypothetically less volatile than the market at large. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. Over the past 5 years, the fund has a negative alpha of -4.05. This means that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, FREEX is a load fund. It has an expense ratio of 0.99% compared to the category average of 1.22%. From a cost perspective, FREEX is actually cheaper than its peers.

While the minimum initial investment for the product is $1,000, investors should also note that there is no minimum for each subsequent investment.

Bottom Line

Overall, Franklin Real Estate Security A ( FREEX ) has a low Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Franklin Real Estate Security A ( FREEX ) looks like a somewhat weak choice for investors right now.

For additional information on the Sector - Real Estate area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into FREEX too for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.


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