Is VALIC Company I Emerging Economies (VCGEX) A Strong Mutual Fund Pick Right Now?

Having trouble finding a Global - Equity fund? VALIC Company I Emerging Economies VCGEX is a potential starting point. VCGEX has a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We note that VCGEX is a Global - Equity option, an investment area loaded with different options. While Global - Equity mutual funds invest their assets in large markets--think the U.S., Europe, and Japan--they aren't limited by geography. Their investment technique is one that leverages the global economy in order to offer stable returns.

History of Fund/Manager

VALIC Funds is based in Houston, TX, and is the manager of VCGEX. VALIC Company I Emerging Economies debuted in September of 2006. Since then, VCGEX has accumulated assets of about $708.87 million, according to the most recently available information. George Iwanicki is the fund's current manager and has held that role since October of 2011.

Performance

Of course, investors look for strong performance in funds. VCGEX has a 5-year annualized total return of 5.27% and it sits in the bottom third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 12.59%, 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 10.89%, the standard deviation of VCGEX over the past three years is 16.02%. The standard deviation of the fund over the past 5 years is 14.96% compared to the category average of 10.56%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors cannot discount the risks to this segment though, as it is always important to remember the downside for any potential investment. In the most recent bear market, VCGEX lost 67.42% and underperformed comparable funds by 14.99%. These results could imply that the fund is a worse choice than its peers during a sliding market environment.

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. VCGEX has a 5-year beta of 0.93, which means it is likely to be less 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. VCGEX has generated a negative alpha over the past five years of -7.74, demonstrating 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, VCGEX is a no load fund. It has an expense ratio of 0.94% compared to the category average of 1.20%. So, VCGEX is actually cheaper than its peers from a cost perspective.

This fund requires a minimum initial investment of $0, while there is no minimum for each subsequent investment.

Bottom Line

Overall, VALIC Company I Emerging Economies has a high Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, average downside risk, and lower fees, this fund looks like a great potential choice for investors right now.

This could just be the start of your research on VCGEX in the Global - Equity category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.