As a finance and investment expert, I often analyze mutual funds to determine which ones offer the best risk-adjusted returns. One family of funds that consistently stands out is American Century Investments. In this article, I will examine their top-performing mutual funds, dissect their investment strategies, and help you decide whether they fit your portfolio.
Table of Contents
Why American Century Mutual Funds?
American Century Investments, founded in 1958, has built a reputation for delivering strong performance across equity and fixed-income funds. Their funds often outperform benchmarks, thanks to disciplined quantitative and fundamental strategies.
Key Strengths
- Active management – Many of their funds rely on deep research rather than passive indexing.
- Diversified offerings – They cover growth, value, and blended strategies.
- Risk management – Their models incorporate downside protection.
Top American Century Mutual Funds
Let’s analyze some of their best-performing funds based on historical returns, expense ratios, and risk metrics.
1. American Century Ultra Fund (TWCUX)
Objective: Large-cap growth stocks
Expense Ratio: 0.95%
10-Year Annualized Return: 12.3% (vs. S&P 500’s 11.8%)
This fund invests in high-growth companies like Microsoft, Apple, and Nvidia. It uses a bottom-up stock selection process, focusing on earnings momentum.
Performance Analysis
The fund’s alpha (\alpha)—a measure of excess return—has been positive over the last decade:
\alpha = R_p - [R_f + \beta (R_m - R_f)]Where:
- R_p = Portfolio return
- R_f = Risk-free rate (e.g., 10-year Treasury yield)
- \beta = Market sensitivity
- R_m = Market return
For TWCUX:
- \beta = 1.05 (slightly more volatile than the market)
- \alpha = 0.5% (outperformance after adjusting for risk)
2. American Century Mid Cap Value Fund (ACMVX)
Objective: Undervalued mid-cap stocks
Expense Ratio: 1.09%
10-Year Annualized Return: 9.7% (vs. Russell Midcap Value’s 8.5%)
This fund targets companies with strong cash flows but temporarily depressed valuations.
Sharpe Ratio Analysis
The Sharpe ratio (S) measures risk-adjusted returns:
S = \frac{R_p - R_f}{\sigma_p}Where:
- \sigma_p = Portfolio standard deviation
For ACMVX:
- S = \frac{9.7\% - 2.5\%}{14\%} = 0.51
(A Sharpe ratio above 0.5 is considered good for value funds.)
3. American Century Government Bond Fund (CPTNX)
Objective: U.S. Treasury and agency bonds
Expense Ratio: 0.48%
10-Year Annualized Return: 2.8%
This fund is a low-risk option for conservative investors.
Duration Risk Analysis
Bond funds are sensitive to interest rate changes. The modified duration (D_m) tells us how much the price drops if rates rise by 1%:
D_m = \frac{\Delta P / P}{\Delta y}For CPTNX:
- D_m = 5.2
- If rates rise by 1%, the fund loses ~5.2% in value.
Comparative Performance Table
| Fund | Category | Expense Ratio | 10-Yr Return | Sharpe Ratio |
|---|---|---|---|---|
| TWCUX | Large Growth | 0.95% | 12.3% | 0.68 |
| ACMVX | Mid-Cap Value | 1.09% | 9.7% | 0.51 |
| CPTNX | Govt Bonds | 0.48% | 2.8% | 0.30 |
Are These Funds Right for You?
For Growth Investors
- TWCUX is ideal if you seek high-growth large caps.
- Downside: Higher volatility than index funds.
For Value Investors
- ACMVX offers solid returns with a margin of safety.
- Downside: Higher expense ratio than ETFs.
For Conservative Investors
- CPTNX provides stability but low returns in a rising-rate environment.
Final Thoughts
American Century’s top funds demonstrate strong active management. However, fees and market conditions play a crucial role in long-term performance. Before investing, assess your risk tolerance and compare these funds with low-cost index alternatives.
