DY N A M I C O P P O R T U N I T I E S / F LY E R
A Focus on Risk-Adjusted Returns
Alger Dynamic Opportunities Fund
The Alger Dynamic Opportunities Fund’s strong risk-adjusted returns versus its peers makes it a prime
candidate for investors seeking to dampen portfolio volatility.
Strong Risk-Adjusted Returns Compared to Peers
As highlighted in a recent publication (Alger’s Bringing Long/Short Equity Into Focus), we believe the varying investment strategies
in the Morningstar Long/Short Equity category have led to wide performance dispersion and investor confusion. Investors looking
to dampen portfolio volatility with long/short equity should look at a number of characteristics, not just performance, to see if a fund
has compelling risk-adjusted returns. The Alger Dynamic Opportunities Fund has outperformed the Morningstar Long/Short Equity
category with less risk, which demonstrates its strong risk-adjusted returns compared to its peers. Other funds in the category
may be generating strong performance driven by excess market risk due to their high net exposure.
Net Exposure
Beta
Standard Deviation
Downside Capture
Alpha
Alger Dynamic Opportunities Fund (A)
50.91
0.56
6.69
49.08
-0.08
Morningstar Long/Short Equity Category Average
64.72
0.55
7.65
60.72
-2.00
Source: Morningstar, three-year period ended 9/30/15.
Net exposure, which measures a portfolio’s average exposure
to the market (long positions minus short positions), is 50.91
for the Fund. As such, the Fund is approximately half exposed
to the market, which means it is hedging market risk. Other
funds within the category may not be appropriately hedged
given an average net exposure of 64.72, which means these
funds may not provide protection in down markets.
Beta, which measures a portfolio’s volatility in comparison to
the overall market, is 0.56 for the Fund. This demonstrates the
Fund’s volatility is about half that of the market’s volatility.
Standard deviation, which measures the variability of a
portfolio’s return, is 6.69 for the Fund. This demonstrates the
Fund’s consistency of performance, particularly in light of the
higher volatility exhibited by the category.
Downside capture ratio measures how a particular fund has
performed versus its benchmark when the benchmark dropped.
A downside capture ratio of 100 indicates that a fund has lost
as much as its benchmark, whereas a downside capture ratio of
50 indicates a fund lost half as much as its benchmark when
the benchmark has dropped. The Fund’s downside capture ratio
of 49.08 is lower than its peers, which demonstrates very low
downside risk potential.
Alpha measures the value a portfolio manager adds to a return
rather than the performance attributable to general market
movements. The Fund’s alpha demonstrates significantly better
risk-adjusted perfomance than most other funds in the category.
Average Annual Total Returns (As of 9/30/15)
1 Year
3 Years
5 Years
Batting Average
Alger Dynamic Opportunities Fund (A)
0.77
6.76
6.06
66.67
Morningstar Long/Short Equity Category Average
-2.33
4.74
5.78
51.66
Source: Morningstar. Fund performance does not reflect a deduction of sales charges. The comparison would have been less favorable had sales charges been deducted.
The performance data quoted in this material represents past performance, which is not an indication or a guarantee of future results. Current
performance may be lower or higher than the performance quoted. For performance current to the most recent month-end, visit www.alger.com or
call (800) 992-3863. Class A shares are subject to a maximum 5.25% front-end sales charge.
Batting average measures a manager’s track record of
meeting or beating a benchmark or category average over a
period of time, which is an important factor to evaluate when
looking for a fund’s consistency of returns. A batting average
of 60 demonstrates matching or outperforming 60% of the
time. The Fund’s batting average versus the category average
is 66.67, which demonstrates that the Fund has consistently
outperformed its peers over the long-term.
Adding the Alger Dynamic Opportunities Fund
to a Portfolio
The Alger Dynamic Opportunities Fund has had strong
risk-adjusted returns versus its peers as shown above. The
Fund’s strong risk and return characteristics demonstrate it
had hedged market risk during the period shown, and it had
not taken undue risk given its low beta, standard deviation,
and downside capture ratio. As such, investors seeking to
dampen portfolio volatility should consider adding the Fund
to their portfolios.
Learn more at www.alger.com/SPEDX or contact your financial advisor.
DYNA M I C O PPO RT U N IT IES 2/ 2
Average Annual Total Returns (as of 9/30/15)
Ticker
CUSIP
3Q15
Not Annualized
YTD
Not Annualized
1 Year
3 Years
5 Years
Since Inception
SPEDX
015566813
-6.04%
-11.00%
-0.74%
-5.96%
0.77%
-4.54%
6.76%
4.87%
6.06%
4.93%
5.74%
4.78%
ADOCX
015566748
ADOZX
015566755
-6.19%
-7.13%
—
-1.27%
-2.26%
-0.57%
0.03%
-0.91%
1.08%
5.96%
5.96%
7.03%
5.27%
5.27%
—
S&P 500 Index
-6.44%
-5.29%
-0.61%
12.40%
13.34%
Morningstar Category Average (Long/Short Equity)
-4.38%
-3.63%
-2.33%
4.74%
5.78%
4.94%
4.94%
5.40%
(Since 11/2/09) 13.25%
(Since 12/29/10) 11.61%
—
Morningstar Percentile Rank (Long/Short Equity Category)
Class A
—
—
40%
37/91
—
Class C
—
—
—
Class Z
—
29%
53/180
36%
65/180
26%
46/180
3.23%
—
—
Class A (Incepted 11/2/09)
Without Sales Charge
With Sales Charge
Class C* (Incepted 11/2/09)
Without Sales Charge
With Sales Charge
Class Z** (Incepted 12/29/10)
Total Annual Fund Operating Expenses (Prospectus Dated 3/1/15)
27%
109/411
31%
—
128/411
24%
—
99/411
Class A: 2.46%
Class C:
Class Z: 2.18%
The performance data quoted represents past performance, which is not an indication or a guarantee of future results. Investment returns
and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original
cost. Class A shares are subject to a maximum sales charge of 5.25%. Class C shares held less than one year are subject to a 1% contingent
deferred sales charge (CDSC). Current performance may be lower or higher than the performance quoted. For performance current to the
most recent month-end, visit www.alger.com or call (800) 992-3863.
* The performance of the Class C shares prior to 12/29/10 reflects the performance
of the Class A shares adjusted to reflect the Class C shares’ current maximum sales
charges and operating expenses, which differ from historical charges and expenses.
**There is a minimum initial investment for Class Z shares of $500,000 and no distribution and/or service fee.
Risk Disclosure: Investing in the stock market involves gains and losses and may not
be suitable for all investors. Investment return and principal value of an investment will
fluctuate so that an investor’s shares, when redeemed, may be worth more or less than
their original cost. Growth stocks tend to be more volatile than other stocks. Their prices
tend to be higher in relation to earnings and may be more sensitive to market, political,
and economic developments. Small-capitalization and microcap stocks are subject to
greater risk than larger capitalization stocks owing to such factors as limited liquidity,
inexperienced management, and limited financial resources. Funds that invest in foreign
securities involves additional risks (including currency risk, risks related to political,
social or economic conditions, and risks associated with the foreign markets, such as
increased volatility, limited liquidity and lack of industry diversification) and may not be
suitable for all investors. The cost of borrowing money to leverage may exceed the returns
for the securities purchased or the securities purchased may actually go down in value;
thus, the Fund’s net asset value could decrease more quickly than if it had not borrowed.
Alger strategies use derivatives. A small investment in derivatives could have a potentially
large impact on a strategy’s performance.
Short selling (or “selling short”) is a technique used by investors who try to profit from
the falling price of a stock. It is the act of borrowing a security from a broker and selling
it, with the understanding that it must later be bought back and returned to the broker.
In order to engage in a short sale, the Fund arranges with a broker to borrow the security
being sold short. In order to close out its short position, the Fund will replace the security
by purchasing the security at the price prevailing at the time of replacement. The Fund
will incur a loss if the price of the security sold short has increased since the time of the
short sale and may experience a gain if the price has decreased since the short sale. The
use of short sales could increase a strategy’s exposure to the market, magnifying losses
and increasing volatility.
The Fund is a non-diversified investment company, which means that it is not required
to maintain, as to 75% of its assets, no more than 5% of its assets in any single issuer.
Therefore, the Fund’s performance may be more vulnerable to changes in the market
value of a single issuer and more susceptible to risks associated with a single economic,
political, or regulatory occurrence than a fund that has a diversified portfolio.
The S&P 500 index is an unmanaged index generally representative of the U.S. stock market without regard to company size. Investors cannot invest directly in any index. Index
performance does not reflect deduction for fees, expenses, or taxes.
Beta measures a portfolio’s sensitivity to market movements and measures the relationship
between a portfolio’s excess return over Treasury bills and the excess return of the benchmark index; a portfolio with a beta of 1.00 is considered as risky as the benchmark and
would be expected to provide returns approximately equal to the market during both up
and down periods. Standard Deviation measures how much a portfolio’s return has deviated from its average historical return. Downside capture ratio measures how a particular
fund has performed versus its benchmark when the benchmark dropped. A downside
capture ratio of 100 indicates that a fund has lost as much as its benchmark, whereas a
downside capture ratio of 50 indicates a fund lost half of much of its benchmark when the
benchmark has dropped.
The Morningstar Long/Short Equity Category includes open-end funds that hold sizable
stakes in both long and short positions in equities and related derivatives.
Morningstar percentile rankings are based on the total return percentile rank (excluding
sales charge) within each Morningstar Category. The highest (or most favorable) percentile rank is 1 and the lowest (or least favorable) percentile rank is 100. If sales charges
were included, performance would be lower and the rank may be lower. Any reference
to the Morningstar Rating™ must use the term “Rating” as opposed to “Ranking.” The
Morningstar Rating™ is not to be confused with a “Ranking.”
Before investing, carefully consider the Fund’s investment
objectives, risks, charges, and expenses. For a prospectus or
summary prospectus containing this and other information
about the Fund, call (800) 992-3863, visit www.alger.com,
or consult your financial advisor. Read it carefully before
investing. Distributor: Fred Alger & Company, Incorporated. Member
NYSE Euronext, SIPC. NOT FDIC INSURED. NOT BANK GUARANTEED
MAY LOSE VALUE.
Fred Alger Management, Inc. 360 Park Avenue South, New York, NY 10010 / 800.223.3810 / www.alger.com
ALDOBRO-1015