Report: Small-Cap Growth Funds Are Risk City
Overall, growth funds are significantly riskier than core or value offerings, according to the latest Lipper-Barra Mutual Fund Risk Factor report. The small-cap growth funds, on average, are the most risky category in Lipper’s diversified equity matrix (riskier than 82% of dversified equity funds), and are much riskier than large-cap value offerings. Large-cap value funds carry more risk on average than only 22% of the diversified equity options.
What did investors get for assuming those comparative risk levels? Lipper said small-cap growth funds have returned more than 28% so far in 2003, while large-cap value funds have lagged with a year-to-date return of 13%.
“Funds with higher risk factors can provide greater profit opportunities than funds with lower risk factors under favorable conditions in the markets, sectors, or styles in which the fund is concentrated,” Lipper commented. “However, when conditions are unfavorable, funds with higher risk factors often sustain greater losses. Funds with lower risk factors are generally more diversified and therefore less affected by the returns of individual stock holdings.”
According to the report, the average risk factor is 50, with those greater than 50 generally holding riskier funds, while those below, on average, hold less risky funds.
Risk factors for other Lipper style classifications (figure represents percentage of diversified domestic equity offerings deemed less risky) include:
- multi-cap growth – 73%
- mid-cap growth – 72%
- large-cap growth – 60%
- small-cap core – 58%
- small-cap value – 54%
- mid-cap value – 48%
- multi-cap core – 45%
- mid-cap core – 40%
- multi-cap value – 35%
- large-cap core – 33%.
The Lipper-Barra report also rated sector risk:
- Science and Technology – 83%
- Telecommunications – 72%
- Natural Resource – 56%
- Specialty and Misc. – 42%
- Financial Services – 41%
- Health and Biotech – 34%
- Utility – 32%
- Real Estate – 13%.
For more information, go to www.lipperweb.com .