Dynamic Power American Growth

Analysis: Like most of the other funds launched under the Power banner, this is not a fund for the faint of heart. Manager Noah Blackstein uses a very concentrated, growth oriented approach in managing this fund. Because of this, the fund tends to be considerably more volatile than other U.S. equity funds, with a level of volatility more than 1.5 times the S&P 500 Index.

The first step in the stock selection process is a quantitative screen which looks to identify companies which are showing strong earnings momentum and have a history of upside earnings surprises. Once these companies are identified, the manager conducts a detailed fundamental review focusing on cash flows, management, and the company’s competitive environment.

The result is a very concentrated portfolio. Typically the manager will hold 20 to 30 names in the portfolio. As of July 31, the top 10 stocks in the fund accounted for more than 70% of the fund. There is also typically significant concentration with respect to sector exposure, with half the fund invested in technology stocks. The manager is also very active in managing the portfolio, with portfolio turnover averaging more than 300% in the past five years.

This is not a cheap fund to own. The management fee is 2.0%, but there is also a performance fee for this fund, which when included in the total costs, pushes the MER up to 3.61%. While the total costs may be high, the performance has been strong, significantly outperforming the S&P 500 over the past five and ten year periods.

Despite the strong returns generated by this fund, we would be reluctant to suggest it be used as a core U.S. equity fund. The volatility of the fund is far too high for most investors. Rather, we would suggest that this fund be used by investors with a strong appetite for risk who are looking for a little high octane in their portfolios.