The Touchstone Sands Capital Institutional Growth Fund Is Feeling The Pain

| About: Touchstone Sands (CISGX)

Summary

The Touchstone Sands Capital Institutional Growth Fund Inst's performance ratios from 1-month to 1-year has greatly under-performed its benchmarks.

The fund is overvalued in all price multiples and has a reduced funding of giant-cap stocks compared to its benchmarks.

The fund's increasing downside capture ratio is indicative of the fund's increasing inability to limit losses in downward markets.

In consecutive games, Demarcus Ware and Von Miller led the Broncos' charge in delivering painful knockdowns to Tom Brady and Cam Newton. After the game, it was clear that the pain of losing the Lombardi Trophy in front of the entire universe was written all over the face of Panthers cornerback Josh Norman.

While the aforementioned examples of pain are significant in different ways, the prospect theory of investing is clear that the pain in losing funds significantly outweighs the potential joy of gaining funds.

Unfortunately, investors of the Touchstone Sands Capital Institutional Growth Fund Inst (MUTF:CISGX) are getting crushed under the mighty claw of the bears in 2016. This can be seen in the performance ratios below. Surely, the fund was outperformed in the 3-year return ratio. However, the fund has been crushed in all monthly ratios leading up to the 1-year return ratio. Given its YTD return, the fund has not been able to stop the bleeding.

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The 3-year volatility measures paint a greater picture of the fund's struggles. In spite of the fund's enhanced volatility, the fund's return, Sharpe Ratio and Sortino Ratio are rather underwhelming compared to its benchmarks. This can be seen in the chart below:

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When one looks at the market capitalization percentages of this large growth fund, one can see that the fund has a significant deficit when it comes to weighting of giant-cap stocks. Even though the fund has a decided advantage in large-cap weighting, it is quite plausible that the deficit in giant-cap weighting could have played a role in the increased downside risk when compared to other funds in its category average and its overall benchmark. The chart can be seen below.

Size

% of Portfolio

Benchmark

Category Average

Giant

32.26

47.32

63.08

Large

54.03

32.68

18.34

Medium

13.71

18.44

18.23

Small

0.00

1.52

2.26

Micro

0.00

0.03

0.09

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Another glaring sign of trouble for this fund is the overvaluation of all price multiples. Even though these figures are as of 11/30/2015, the fund's significant overvaluation over its benchmarks and category average is hard to ignore. The P/E Ratio of the Touchstone Sands Capital Institutional Growth Fund Inst was more than twice the amount of its benchmark.

Price Multiple

Stock Portfolio

Benchmark

Category Average

Price/Prospective Earnings

41.13

19.05

21.69

Price/Book

6.85

4.57

3.82

Price/Sales

5.81

1.96

2.75

Price/Cash Flow

19.56

12.80

14.72

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Of course, this fund's poor performance would not be possible without some overexposure to poor performing sectors. In this case, this can be seen in the fund's exposure to the fund's healthcare and financial services sector. Currently, the financial services (-11.2%) and healthcare sectors (-14.4%) are the 1st and 3rd worst performing U.S Sector ETFs according to this forum. This can be seen below:

Sector

% of Stocks

Benchmark

Category Average

Financial Services

17.09

5.12

10.83

HealthCare

22.43

16.86

19.56

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NOTABLE HOLDINGS THAT MAY BE WEIGHING DOWN THE FUND

In terms of financial services holdings, the fund has an 11.27% weighted holding in Visa Inc. (NYSE:V) Currently, Visa Inc. is down -11.89% YTD. Charles Schwab (NYSE:SCHW) has the ninth highest portfolio weight in the fund at 3.45%, yet is down -29.12% for the year.

On the other hand, the fund's has heavily-weighted healthcare equities that are weighing down this fund considerably. Most of these equities are from the pharmaceutical industry. The summary of their weightings and performances can be seen below.

Equity Holding

% Portfolio Weight

YTD Return

Regeneron Pharmaceuticals Inc. (NASDAQ:REGN)

6.12%

-32.59%

Alexion Pharmaceuticals Inc. (NASDAQ:ALXN)

4.33%

-28.46%

Biomarin Pharmaceuticals Inc. (NASDAQ:BMRN)

3.19%

-37.85%

Illumina Inc. (NASDAQ:ILMN)

3.15%

-27.33%

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Finally, the fund's ability to limit losses in downward markets is disintegrating at a rapid pace. This can be seen in its soaring downside capture ratio.

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BOTTOM LINE

The Touchstone Sands Capital Institutional Growth Fund Inst should not be sought after as an investment. It's exposure to the downside is too great based on its weightings in the financial services and healthcare sector. The fund is only getting worse in limiting losses in downward market. Given the current state of this bear market, this fund is simply not cutting it.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.