The Madison Investors Fund Retirement Portfolio Is A Cut Above The Rest

| About: Madison Investors (MNVRX)

Summary

The fund is the top fund in the Large Growth category with a YTD return of 8.43% for the year.

The fund benefits from a lack of exposure to the health-care sector. Furthermore, the fund's health-care holdings have boosted the fund's performance.

The fund has not suffered from overexposure to the poor-performing financial services sector. The fund's performance has actually been boosted by its financial services holdings.

The Madison Investors Fund Retirement Portfolio (MUTF:MNVRX) is the top-rated fund in Morningstar's Large Growth category as of 6/11/2016. The Madison Investors Fund Retirement Portfolio has an 8.43% YTD Return so far this year. On the other hand, the S&P 500 has a 4.54% return while the Morningstar's Large Growth Category has a -1.09% YTD return.

Let us examine why this fund is the current MVP (for now) of Morningstar's Large Growth Category.

When one looks at the market capitalization, one can see that the fund is not nearly as concentrated in giant-cap portfolio weightings as the benchmark and category average. The Madison Investors Fund has a deficit of more than 10% in giant-cap weightings vs. its Morningstar benchmark and Large Growth category average.

On the other hand, the fund has a 10% advantage in the riskier mid-cap weightings versus its benchmarks. This can be seen in the graph below:

Size

% of Portfolio

Benchmark

Category Avg

Giant

37.20

47.25

66.56

Large

31.67

32.54

13.61

Medium

31.13

18.72

17.72

Small

0.00

1.47

1.93

Micro

0.00

0.02

0.19

Click to enlarge

When you take a look at the sector weightings, one can see that the Madison Investors Fund Retirement Portfolio benefits from a sizable deficit in health-care holdings.

Currently, the Health-Care Select Sector (NYSEARCA:XLV) has amassed a big fat doughnut (0%) in terms of YTD Return. Therefore, investors will be pleased to know that the Madison Investors Fund Retirement Portfolio has nearly half of the weighting of its corresponding benchmarks. This can be seen below:

Sector

MNVRX Portfolio

Benchmark

Category Average

Health-Care

8.76

16.87

17.76

Click to enlarge

It also should be mentioned that the fund's two health-care holdings have only proved beneficial to the fund. Johnson & Johnson (NYSE:JNJ) is the third highest weighted holding in the fund at 4.74% and is sixth in the portfolio in YTD Return with 15.42%. The other holding is Varian Medical Systems (NYSE:VAR). Varian Medical Systems has a 5.57% YTD return and is 12th in the fund in terms of portfolio weight.

However, the top-rated fund in the Madison Investors Fund Retirement Portfolio has a sizable portfolio weight advantage in the struggling financial services sector. The Financial Service Select Sector is the worst-performing U.S Sector ETF (NYSEARCA:XLF) with a -2.3% return.

Sector

MNVRX Portfolio

Benchmark

Category Average

Financial Services

16.09

5.31

10.05

Click to enlarge

While it cannot be said that the fund's financial services holdings have provided a tremendous boost, the holdings have also not hurt the fund's progress by any stretch. The performance of the fund's financial services holdings can be seen in the chart below:

Financial Services Holdings

YTD Return

Berkshire Hathaway

7.36%

US Bancorp

-1.07%

Markel Corp

6.07%

Visa Inc

3.75%

Click to enlarge

Thus, the Madison Investors Fund Retirement Portfolio is boosted by the fact that the financial services and health-care sector holdings have not proven detrimental to the fund by any stretch.

The fund also has significant advantages in terms of upside and downside capture ratios. As you can see in the graph below, the Madison Investors Fund Retirement Portfolio's upside capture ratio has trended upward overall over the past 15 years. For a long time, the fund had always lagged behind the Morningstar Large Growth category in terms of performance in upward markets.

Now the fund has a slight edge in the upside capture ratio over the upside capture ratio of the Morningstar Large Growth category.

Click to enlarge

In this graph below, the MNVRX Downside Capture Ratio is in a downward trend over the past 15 years. This illustrates the fund's increased ability to limit losses in downward markets. The downside capture ratio of the Morningstar Large Growth category illustrates a diminished ability to limit downside risk in down markets, especially within the past two years.

Click to enlarge

In terms of affordability, the Madison Investors Retirement Fund has an expense ratio of 0.77% as of the fund's prospectus on February 29th. This expense ratio is slightly higher than that of the fee level group comparison median. (0.70%). However, the fund's expense ratio pales in comparison to the expense ratio of the Morningstar Large Growth category, which is 1.14%. Given the top-notch performance of this fund, I believe that the fund's expense ratio is quite affordable.

CONCLUSION

Therefore, I believe that this fund is well worth the investment. The Madison Investors Retirement Fund has benefited from the fact that the health-care and financial services sectors have not served as a deterrent to the fund's performance.

Many funds are paying a dear price for the meager performance of these sectors. The Madison Investors Retirement Fund is not one of them. Additionally, investors must be intrigued by the fund's increased performance in upward markets as well as their increased ability to limit losses in downward markets.

Finally, the fund has an affordable expense ratio considering the fund's above-average performance.

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.