Best And Worst Q3 2020: Mid Cap Growth ETFs And Mutual Funds

Summary

• The Mid Cap Growth style ranks eleventh in Q3'20.
• Based on an aggregation of ratings of 12 ETFs and 372 mutual funds in the Mid Cap Growth style.
• XMMO is our top-rated Mid Cap Growth style ETF and TMPIX is our top-rated Mid Cap Growth style mutual fund.
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The Mid Cap Growth style ranks 11th out of the twelve fund styles as detailed in our Q3'20 Style Ratings for ETFs and Mutual Funds report. Last quarter, the Mid Cap Growth style ranked eleventh as well. It gets our Unattractive rating, which is based on an aggregation of ratings of 12 ETFs and 372 mutual funds in the Mid Cap Growth style. See a recap of our Q2'20 Style Ratings here.

Figures 1 and 2 show the best and worst rated ETFs and mutual funds in the style. Not all Mid Cap Growth style ETFs and mutual funds are created the same. The number of holdings varies widely (from 16 to 674). This variation creates drastically different investment implications and, therefore, ratings.

Investors seeking exposure to the Mid Cap Growth style should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2.

Figure 1: ETFs with the Best and Worst Ratings

* Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

Franklin LibertyQ U.S. Mid Cap Equity ETF (FLQM), Innovator IBD Breakout Opportunities ETF (BOUT), and SoFi 50 ETF (SFYF) are excluded from Figure 1 because their total net assets are below $100 million and do not meet our liquidity minimums.

Figure 2: Mutual Funds with the Best and Worst Ratings – Top 5

* Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

AMG Managers Cadence Mid Cap Fund (MCMFX) is excluded from Figure 2 because its total net assets are below $100 million and do not meet our liquidity minimums.

Invesco S&P Mid Cap Momentum ETF (XMMO) is the top-rated Mid Cap Growth ETF and Touchstone Mid Cap Fund (TMPIX) is the top-rated Mid Cap Growth mutual fund. XMMO earns an Attractive rating and TMPIX earns a Very Attractive rating.

Global X Founder-Run Companies ETF (BOSS) is the worst rated Mid Cap Growth ETF and Sparrow Growth Fund (SGFFX) is the worst rated Mid Cap Growth mutual fund. BOSS earns an Unattractive rating and SGFFX earns a Very Unattractive rating.

The Danger Within

Buying a fund without analyzing its holdings is like buying a stock without analyzing its business and finances. Put another way, research on fund holdings is necessary due diligence because a fund’s performance is only as good as its holdings’ performance.

Performance of Holdings = Performance of Fund

Analyzing each holding within funds is no small task. We perform this diligence with scale. More of the biggest names in the financial industry (see At BlackRock, Machines Are Rising Over Managers to Pick Stocks) are now embracing technology to leverage machines in the investment research process. Technology may be the only solution to the dual mandate for research: Cut costs and fulfill the fiduciary duty of care. Investors, clients, advisors and analysts deserve the latest in technology to get the diligence required to make prudent investment decisions.

Figures 3 and 4 show the rating landscape of all Mid Cap Growth ETFs and mutual funds.

Figure 3: Separating the Best ETFs from the Worst Funds

Sources: New Constructs, LLC and company filings

Figure 4: Separating the Best Mutual Funds from the Worst Funds

Sources: New Constructs, LLC and company filings

This article originally published on July 24, 2020.

Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, style, or theme.

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