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Most Popular Mutual Funds - Gainers and Losers
In response to feedback from many of our subscribers, we are beginning a regular column which will examine changes in
our database of Most Popular Mutual Funds. Our goal is to identify funds which show significant gains or losses in
usage by RIAs and the HNW/UHNW clients they serve - essentially evidence of a significant change in sentiment regarding
the fund. This is not a simple task (as explained in the methodology below) and, as a result, we will provide two
types of reviews on a periodic basis. Today we provide an informal review, which focuses on a limited number of
funds used in our largest accounts. We plan to provide this type of informal review on monthly or every six week
schedule. On a quarterly basis we will provide a more exhaustive review of all funds in all account tiers.
Funds Exhibiting Significant Gains
- GHYAX - GOLDMAN SACHS HIGH YIELD MUNICIPALS FUND
- Currently 16th among largest accounts
(View Data); 34th as of 3/31/07
- Currently 2nd among medium term municipal bond funds (View Data); 2nd on 3/31/07:
- Change in AUM since 3/31/07: +78%
- Currently used by approximately 10% of advisory firms in AP universe (little change since 3/31/07)
- Small change in number of accounts holding fund
- Fund has gained significant assets in existing accounts
PRF - PS FTSE RAFI UNITED STATES 1000
- Was not in AP universe on 3/31/07
- Currently 6th among ETFs (View Data)
- Currently 10th among US equity large cap funds (View Data)
- Fund is now held in 514 accounts by approximately 1% of advisory firms in AP universe
- Fund has gained significant assets through new usage
IWS - ISHARES TRUST RUSSELL MID CAP VALUE
- Currently 6th among US equity value funds (View Data); was 10th on 3/31/07
- Currently 10th among US equity mid cap funds (View Data); was 19th on 3/31/07
- Fund is now held in 55 accounts and used by approximately 13% of advisory firms in AP universe
- Fund assets have grown by over 255%
- Fund has gained significant assets in existing and new accounts
Funds Exhibiting Significant Losses
- XLG - RYDEX RUSSELL TOP 50 ETF
- No longer in AP universe
- As of 3/31/07 was ranked 16th in AP universe; was held in 525 accounts and used by 4% of advisory firms in AP universe
- Fund has lost adoption in AP universe
Methodology
When we began this analysis, we naively thought that we could look at funds that had moved up our down in their
rankings, and that would provide pretty good evidence of changes in sentiment among advisors and HNW/UHNW investors.
We quickly realized this is not the case. We rank funds by the assets under management (AUM) within our universe.
A fund's ranking can improve or decline only if its AUM changes relative to other funds. When we look at the largest
accounts, as we do with the analysis above, such changes can be due to any of the following:
- Existing advisors shifting money into/out of existing accounts
- Existing advisors putting money into of new accounts, or closing existing accounts
- New advisors putting money into new accounts
- Gains or losses in AUM due to fund performance
- Funds moving from the mid-sized account tier to the largest account tier, and vice versa
We looked at the data since the beginning of 1Q07, the inception of our service. We saw examples where funds
moved down in ranking, but where the AUM increased and the number of advisors utilizing the funds remained constant,
as did the number of accounts holding the funds. We do not consider this a significant change in sentiment regarding
the fund which, as we stated above, is our guiding criteria in this analysis. To insure that we accurately identified
changes in sentiment, we reviewed the top 100 funds currently in the largest accounts (as of May 21, 2007) as well as
the top 100 funds as of March 31, 2007 (the end of 1Q07). We looked for situations where one or -more often- more of
the following occurred:
- Change in fund ranking
- Change in AUM beyond what would be expected due to fund performance
- Increase or decrease in the number of advisors using the fund
- Increase or decrease in the number of accounts holding the fund
We also eliminated situations where changes in fund usage were due to movements between the largest and mid-sized
account tiers. Some subjective judgment comes into play. We could not define an objective metric or standard that
would allow us to measure changes in the universe. But we believe that the examples we show above exhibit evidence
of changes in advisor/investor sentiment. We are providing the criteria we used to select these funds, so you can
be the final judge as to whether the change in advisor/investor sentiment is significant.
Lastly, we believe that the time period we are using (approximately seven weeks) may not be sufficient to identify significant changes. As we accumulate more historical data, we will refine the time period we use for this analysis. We also note that the rankings in the largest accounts were relatively stable during this period. Of the top 10 funds, there was only one change in ranking (the 8th and 9th ranked funds flipped order), and of the top 25 funds, there was only one new fund (GHYAX replacing XLG).
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