FCAZX
Franklin Corefolio Allocation-Adv
Strategic Diversification Across Franklin Funds
The Franklin Corefolio Allocation-Adv (FCAZX) is designed to provide capital appreciation through a strategic allocation across four distinct Franklin funds. By investing 25% in each of the Franklin Growth Fund, Templeton Growth Fund, Franklin Capital Growth Fund, and Franklin Mutual Shares Fund, FCAZX offers a diversified approach to aggressive growth. This structure allows investors to benefit from the unique strengths and strategies of each underlying fund, providing a balanced exposure to various market sectors and investment styles. This diversification is particularly appealing for investors seeking to mitigate risk while pursuing high returns, as it spreads investments across different asset classes and geographies.
At A Glance
Executive Summary
FCAZX offers diversified exposure across Franklin funds with a focus on aggressive growth, featuring a competitive 0.77% expense ratio.
Diversified exposure to multiple Franklin funds Aggressive growth potential with high equity allocation Competitive expense ratio for active management
Higher risk with negative alpha and Sharpe ratio Underperformance compared to benchmark Limited bond exposure for risk mitigation
Performance Analysis: A Mixed Bag
FCAZX has shown a mixed performance over various time frames. With a one-year return of 32.32%, it has performed well, though it falls short of its benchmark, the S&P 500 Total Return Index, which posted a 37.62% return over the same period. The fund’s five-year annualized return stands at 11.37%, while its inception return is 8.70%. Despite these respectable figures, the fund’s negative alpha of -5.34% and Sharpe ratio of -0.44 indicate that it has not effectively compensated investors for the risks taken. This underperformance relative to the benchmark suggests that while the fund has potential, it may not be the best choice for those seeking returns that consistently outpace the market.
Sector Allocation: Heavy on Technology and Health Care
FCAZX’s sector allocation reveals a strong emphasis on technology and health care, which together comprise over 43% of the fund’s portfolio. This focus aligns with the fund’s aggressive growth strategy, as these sectors have historically offered substantial growth opportunities. Technology, at 27.98%, is the largest sector allocation, reflecting the fund’s commitment to capturing the rapid advancements and innovations in this field. Health care follows with a 15.88% allocation, providing exposure to a sector known for its resilience and potential for long-term growth. This sector allocation strategy positions FCAZX to capitalize on the dynamic and evolving nature of these industries, although it also introduces sector-specific risks.
Risk Metrics: Navigating Volatility
The risk metrics for FCAZX highlight the challenges of managing an aggressive growth fund. With a beta of 0.95, the fund exhibits slightly less volatility than the market, yet its negative alpha of -5.34% suggests it has not effectively leveraged this stability to generate excess returns. The fund’s standard deviation of 3.52% indicates moderate volatility, while the Treynor ratio of -5.61 underscores the fund’s struggle to achieve adequate returns for the level of market risk assumed. Additionally, the fund’s upside potential of -2.84 and downside risk of 1.88 further illustrate the difficulties in achieving consistent performance. These metrics suggest that while FCAZX offers growth potential, it also requires careful risk management and may not be suitable for risk-averse investors.
Comparative Analysis: Standing Among Peers
When compared to similar funds, FCAZX presents a competitive yet challenging profile. Its expense ratio of 0.77% is higher than some peers, such as Schwab MarketTrack All Equity (SWEGX) with an expense ratio of 0.0051%, but it remains reasonable for an actively managed fund. In terms of performance, FCAZX’s one-year return of 32.32% is comparable to Eaton Vance Tax-Managed Eq Aset Alloc-A (EAEAX) at 32.53% and Transamerica AsstAllc Growth-A (IAAAX) at 30.84%. However, its negative alpha and Sharpe ratio indicate that it has not delivered risk-adjusted returns as effectively as some competitors. This comparison highlights the importance of considering both cost and performance metrics when evaluating FCAZX against its peers.
Asset Allocation: A Focus on U.S. Equities
FCAZX’s asset allocation is heavily weighted towards U.S. equities, which constitute 82.54% of the portfolio. This significant allocation reflects the fund’s aggressive growth objective, as U.S. equities have historically provided strong returns. The fund also includes a modest allocation to non-U.S. equities at 14.72%, offering some international diversification. Bonds and cash make up a minimal portion of the portfolio, at 0.73% and 1.40% respectively, indicating a limited focus on income generation and risk mitigation. This asset allocation strategy is well-suited for investors seeking capital appreciation through equity exposure, but it may not appeal to those looking for a balanced approach with fixed income components.
Market Cap Allocation: Emphasizing Large and Extra-Large Companies
The market cap allocation of FCAZX is predominantly focused on large and extra-large companies, which together account for over 71% of the portfolio. This emphasis on larger companies aligns with the fund’s strategy to invest in established firms with proven track records and the potential for sustained growth. Medium-sized companies make up 21.19% of the portfolio, providing exposure to firms that may offer higher growth prospects than their larger counterparts. Small-cap stocks are minimally represented at 3.17%, reflecting a cautious approach to investing in smaller, potentially more volatile companies. This market cap distribution supports the fund’s goal of achieving aggressive growth while maintaining a degree of stability through investments in larger, more established companies.
Conclusion: Is FCAZX Right for You?
FCAZX stands out as a diversified, aggressive growth fund that leverages the strengths of multiple Franklin funds to pursue capital appreciation. Its focus on technology and health care sectors, along with a significant allocation to U.S. equities, positions it well for investors seeking high growth potential. However, the fund’s risk metrics and underperformance relative to its benchmark suggest that it may not be suitable for all investors, particularly those who are risk-averse or seeking consistent outperformance. Investors considering FCAZX should weigh its potential for high returns against the inherent risks and volatility associated with its aggressive strategy. Ultimately, FCAZX may be an attractive option for those with a higher risk tolerance and a long-term investment horizon.
Similar Securities
OAAIX: Invesco Select Risk High Growth Inv-A | Aggressive Growth Strategy
OAAIX offers aggressive growth with a 70% U.S. and 30% international equity split, outperforming peers with a 23.73% 1-year return.
FGTIX: Franklin Growth Allocation-A | Aggressive Balanced Growth Fund
FGTIX offers aggressive growth with a balanced approach, featuring a 0.85% expense ratio and a 1.27% yield, ideal for long-term investors.
SCGRX: Franklin Multi-Asset Moderate Growth-A | Balanced Aggressive Growth Fund
SCGRX offers a balanced aggressive strategy with a focus on large-cap funds, providing diversified growth potential with a 1.12% expense ratio.
GAIEX: American Funds Growth and Income-F2 | Balanced Aggressive Growth and Income
GAIEX offers a balanced aggressive strategy with a 1.98% yield and a competitive 0.45% expense ratio, focusing on growth and income.
AADAX: Invesco Select Risk Growth Investor-A | High-Risk Equity Growth Fund
AADAX offers aggressive growth with 95% equity allocation, outperforming peers with a 21.75% 1-year return despite a high expense ratio.
Futher Reading
https://finance.yahoo.com/quote/FCAZX/”>Yahoo: Franklin Corefolio Allocation-Adv
https://ftcloud.fasttrack.net/web/chart/FCAZX
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