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There are plenty of choices in the Small Cap Growth category, but where should you start your research? Well, one fund that might be worth investigating is Principal Small Cap Growth I Institutional (PGRTX). PGRTX bears a Zacks Mutual Fund Rank of 2 (Buy), which is based on various forecasting factors like size, cost, and past performance.

Objective

PGRTX is part of the Small Cap Growth category, and this segment boasts an array of many other possible options. Small Cap Growth mutual funds usually focus their portfolios on stocks with large growth opportunities and a market cap of under $2 billion. These portfolios tend to feature small companies in up-and-coming industries and markets.

History of Fund/Manager

PGRTX finds itself in the Principal Financial Group family, based out of Des Moines, IA. Principal Small Cap Growth I Institutional debuted in September of 2002. Since then, PGRTX has accumulated assets of about $81.73 million, according to the most recently available information. The fund's current manager is a team of investment professionals.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 7.08%, and is in the bottom third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3 -year annualized total return of 2.99%, which places it in the middle third during this time-frame.

It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Compared to the category average of 15.77%, the standard deviation of PGRTX over the past three years is 20.99%. The standard deviation of the fund over the past 5 years is 21.11% compared to the category average of 16.97%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

With a 5-year beta of 1.11, the fund is likely to be more volatile than the market average. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. The fund has produced a negative alpha over the past 5 years of -7.97, which shows that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Investigating the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is mostly on equities that are traded in the United States.

Currently, this mutual fund is holding 93.48% in stocks, with an average market capitalization of $7.11 billion. Turnover is 61.2%, which means this fund makes fewer trades than the average comparable fund.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, PGRTX is a no load fund. It has an expense ratio of 0.96% compared to the category average of 0.99%. PGRTX is actually cheaper than its peers when you consider factors like cost.

Investors should also note that the minimum initial investment for the product is $0 and that each subsequent investment has no minimum amount.

Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.

Bottom Line

Overall, even with its comparatively weak performance, average downside risk, and lower fees, Principal Small Cap Growth I Institutional ( PGRTX ) has a high Zacks Mutual Fund rank, and therefore looks a great potential choice for investors right now.

This could just be the start of your research on PGRTXin the Small Cap Growth category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank as well for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.

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This article originally published on Zacks Investment Research (zacks.com).

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