Shelton Capital Management S&P Midcap Index Fund

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Performance

The fund has returned 17.64 percent over the past year, 12.71 percent over the past three years, 7.30 percent over the past five years, and 10.59 percent over the past decade.

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Summary

The California Investment S&P MidCap Index fund is a passive equity fund that tracks the S&P 400 Mid Cap Index. The fund uses a replication strategy and holds nearly all 400 of the index’s stocks.

As of May 03, 2013, the fund has assets totaling almost $151.43 million invested in 396 different holdings. Its portfolio consists of almost all 400 stocks of the S&P 400—a diversified index that seeks to capture the return of mid-size U.S. companies.

As an index fund, the fund is passive, meaning management seeks only to replicate the return of its benchmark index. But the fund is permitted to deviate slightly from the index at times by not buying every single security. The fund held 388 stocks at the end of 2010, for instance. Management can also decide when to sell a stock, often doing so in response to regular changes made to the benchmark index (for example, share prices often dip on the exact day the S&P 400 index committee announces a change to the index before the actual change takes place). Management might also hold onto a stock if it believes the stock will appreciate if it graduates into the ranks of the S&P 500 index. The fund has returned 17.64 percent over the past year and 12.71 percent over the past three years.

At about 50 basis points, or half a percent, the fund’s expense ratio is low, nearly half that of Principal’s similar S&P 400 fund. But its small expense ratio is still about twice that of SPDR’s rival ETF product. Fund manager Steve Rogers believes that the fund’s smaller size lowers its transaction costs. “We have a smaller portfolio, and I feel like that’s an advantage when we’re trading securities,” Rogers says. “I’m not trying to turn an aircraft carrier [around] in a bathtub.” The fund has returned 7.30 percent over the past five years and 10.59 percent over the past decade.

Investment Strategy

The fund must invest at least 80 percent of its total assets in the stocks of the S&P 400 Midcap Index. Companies in the index range from about $300 million to nearly $11 billion, but the average stock had a market value of $2.5 billion as of Nov. 30, 2010. “The most significant advantage is the benchmark that it tracks,” says Manager Steve Rogers. “For a number of reasons, it tends to outperform the S&P 500.” As of the beginning of 2011, the S&P midcap index has returned an annualized 7.5 percent over the past 10 years, compared with the S&P 500’s 1.4 percent return over the same period.

Role in Portfolio

This fund could lend support to a well-balanced portfolio.

Management

Steve Rogers has managed the fund since 2004 from his perch at CCM Partners. He has been with CCM since 1993.

Fees

Shelton Capital Management S&P Midcap Index Fund has an expense ratio of 1.08 percent.

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Risk

The fund’s heavy diversification reduces its risk compared with more concentrated funds.

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