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Quality Growth: AKREX, POLRX, EGFFX

Hey guys,

Long time listener, first time caller.

Does anyone have experience with any of these funds that tend to take more concentrated, B&H positions in high ROIC companies with decent growth projections? I’m a big believer in ROIC being the primary quality metric and it doesn’t get a lot of attention for some reason.

They have higher expense ratios, up to 1.4% for Edgewood for example. But they appear to have superior downward capture ratios that more than make up for their higher costs over a longer investment horizon. OTOH, growth has also had a hell of a run over the past decade, so that could have influenced the risk metrics somewhat. Everything goes in cycles.

Seems like these would be on the opposite end of the spectrum from indexing and give you some good offense with some decent defense.

Thank you for your comments in advance



  • edited September 2021
    My only comment would be why pay for AKREX whose turnover is 4%. May be just buy the components on your own and keep track of portfolio changes. I do not understand how these mangers are able to make hundreds of million in fees for doing so little. I would understand if the fund ranks at the top in total return all the time. It is easy to sell low volatility or high downside capture (I.e. fear) at the expense of long periods of underperformance.
  • edited September 2021
    Have owned AKREX for many years and PGIRX since inception of fund. No thoughts of selling either. This quote reflects much of the basic approach each of these funds takes:
    We believe in owning exceptional businesses for as long as they remain so, paying appropriately for their growth prospects when such opportunities present, and holding on during periods of richer valuation out of respect for the exceptional quality of the business. Akre Focus Fund Report 1/31/21
  • @LewisBraham, Thanks for the post and link.

    As an edit to my previous post, I am not opposed to paying fees of any magnitude if it is commensurate with the uniqueness of the offering (I.e., where alternatives are scarce).
  • edited September 2021
    Just another general comment about AKREX and PGIRX (a somewhat close cousin to POLRX). Both under performed in 2020 as the stock market melted up in response to central bank and fiscal policy interventions. That doesn't concern or surprise me. This is waiting time for me for these two OEFs. How successfully will their stock selection approaches adapt to match the contours of the emerging new normal economy? It will take perhaps a couple of years for me to get a sense for that. And, yes. Multiple studies indicate active manager market out performance that continues for a decade or more is quite unusual for OEFs.
  • AKREX also lagged large growth in 2020 because it is less exposed to tech than other LG funds (20% in tech per a quick check at Fidelity). And I think this has been generally true over the years…..AKREX finds growth companies mostly outside of tech and holds them for years (low turnover). Good diversifier to other large growth funds, IMHO.
  • edited September 2021
    I've held AKREX/AKRIX for a number of years and am very pleased with it. It's all about perception and expectation, I believe. If you want a LCG fund with FAANG stocks and other go-go stocks, then AKREX/AKRIX is not the vehicle.

    AKREX has performed superbly outside of 2020, when it was in the 87th percentile (-15% of LCG), BY FAR its worst relative performance.

    Unfortunately, 2020 skews its multi-year relative category performance ranking. Its annual ranks range from 1% to 29%; YTD 28%. Not bad as far as i am concerned.

    Its ten-year rank is in the 17th percentile (20.04%), again good with me. As Graust stated, its a good diversifier for other growth funds. I'll go a step further and say it's a good diversifier for most LCV and LCB funds, particularly S&P500 indexes which are top-heavy with FAANG.

    One last point, its Risk/Reward profile for all time frames is exceptional; it's also a GO fund. That's not so say there aren't better funds available, but AKREX/AKRIX is a fund to consider.

    Just one man's opinion.

    A good discussion, keep the thread alive.

  • edited September 2021
    Founding manager of AKREX Chuck Are steped down at the end of 2020. He is 78. The team was preparing for that for a long time, so hopefully they will be just fine. But the focus of the fund was changing lately, less financials, more technology. Time will tell...
  • @finder, with AKREX having a 4% turn over rate, what data do you see that the fund make-up has changed lately? Not saying you're wrong, but what are you looking at determine less financials and more tech? Could that just be that tech has out performed financials?
  • Good discussion on AKREX. I had almost forgotten about this fund. I just rechecked and another point in its favor is that only dropped about 15% in Feb and March of 2020. I need to study this one again. I’m also interested in looking at its correlation with SPY to see if helps diversify my portfolio more. Like others I am still a bit too heavy on growth — primarily because my 401K equity options are somewhat limited to SPY, EFA and FSMAX. EFA is a more value oriented index but Europe has greatly underperformed US for years
  • Thanks for your comments. Two factors that have helped me select active stock funds are a high active share % combined with a persistent, low downward capture %. I divide active share by downward capture to get a ratio for fund comparison. The higher the better. This has led me to these funds for further research.
  • I’ve been watching this discussion hoping for some insight on EGFFX, a fund unbeknownst to me. From what I can see looking at the holdings it’s a pure growth vehicle that has avoided the relative drop that affected so many growth funds this calendar year. A search on MFO of the fund symbol shows that the only person who said he was a buyer was our erstwhile contributor, Old_Skeet, and that message is from 2015. I have held AKREX for about 8 years and been very pleased. Thanks to @Griffin for showing us that there gems out there that don’t get our attention.
  • edited September 2021
    It is helpful maybe to remember that old skeet held 60-70 mutual funds at that time so to the unaware he had an insiders look or hand in all the great funds. I'm in no way saying that he didn't but when a investor is that spread out they are bound to pass go more often than another with fewer holdings.
  • Agree @mark. When you carry that many funds, for every winner in a portfolio there are probably 5-10 mediocre to bad funds too. Just the rules of the game. Your portfolio is indexed at best.
  • You'll probably have a portfolio which resembles an index but with higher costs and lower returns.
  • Concerning AKREX less financials and more tech, this statement was taken from M* analysis of November 2020. Unlike many computer generated summaries, this was a real analysis of changes there. I invest in this fund for many years, and I am very happy about it, but yes indeed it is more slow now.
  • Like @Griffin, I am a longtime follower, but first-time poster. I felt compelled to chime in on this thread because it concerns two of my very favorite funds. I have held substantial positions in both AKRIX and EGFIX for several years and am very pleased with both. I wish the expense ratios were lower, but that is my only complaint and I was able to access the institutional shares at Fidelity so they are 1.05 and 1.00, respectively.

    I tend to prefer high active share, concentrated funds, which led me to the aforementioned pair, as well as the somewhat tamer PRBLX and JENSX.

    I am not at all concerned about Chuck Akre’s retirement because I have faith that the portfolio managers John Neff and Chris Cerrone have learned a lot from their mentor. And the fact the fund has such a low turnover rate means they will not be called upon to do a lot of trading, anyways. If you are looking for high active share and low downside capture, you will be hard pressed to find a better fund.

    I first learned of Edgewood Growth when I saw it listed as one of the top performing large growth funds over the past 5 and 10 years in a table posted online by Kiplinger’s. The thing that stood out to me was that out of the 10 funds listed in each of the tables it was the only one listed that did not have a volatility ranking of 9 or 10. (It was a 5).

    I like the fact this fund is not discussed too much on these kinds of forums. It keeps it a sort of hidden gem. But with total assets of more than $35 billion, it has obviously caught the attention of a lot of (I think smart) investors.
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