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Changes in the Most Popular Mutual Funds
October 21, 2008

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Each quarter we look at changes in Most Popular Mutual Funds in the Advisor Perspectives (AP) universe.  This installment looks at changes from June 30, 2008 to September 30, 2008.  Previous installments of this analysis were in July 2008, April 2008, January 2008, November 2007, August 2007, and May 2007

Our goal is to identify significant changes in sentiment – either positive or negative – among RIAs whose clients are HNW and especially UHNW investors.  Our methodology is explained below.  In the PDF version we provide complete tables of the 25 funds with the largest current AUM in the full AP Universe, as well as in each of the three tiers based on account size (Largest Accounts, Mid-Sized Accounts, and Smallest Accounts).
 
As background, here are the changes across the AP Universe over the current measurement period:

Segment

% Change
in AUM

Change in # of
Accounts

% Change in
 Accounts

Full AP Universe

8.8%

1,326

2.5%

Largest Accounts

9.2%

77

0.6%

Mid-Size Accounts

2.0%

441

2.8%

Smallest Accounts

2.8%

808

3.3%

During the third quarter, US markets declined by 8.87% (based on SPY) and developed non-US markets declined by 20.51% (based on EFA).  Thus, the growth in the AP Universe is due to an increase of accounts and advisors in the universe, which more than offset the decline in value of the assets already in the universe.

Below are some of the significant changes in the AP Universe:

Funds Exhibiting Significant Gains

PTRAX (PIMCO TOTAL RETURN FUND)

  • The fund moved up in overall ranking from 3rd to 2nd as AUM expanded by 16.0% for the full AP universe.  The number of accounts grew by 702 across the AP universe, and fund is used by 11 new advisory firms.  This fund’s performance was -2.13% in the quarter, so the growth was clearly the result of adoption by advisory firms.
  • This growth occurred across all account sizes, and was most pronounced in the largest accounts, where AUM grew by 13.7% and 262 new accounts were added.
  • This fund was also one of the significant gainers in our two last measurement periods.

IJR (ISHARES SPONSORED SMALL CAP 600 INDEX)

  • Fund moved from 280th to 5th in ranking across the AP universe, and from 268th to 5th among the largest accounts.
  • AUM grew by 2,780% across the AP universe, with 25 new accounts and 4 new advisory firms.
  • Most of this growth was in the largest accounts, were AUM grew by over 3,000% and 19 new accounts were added.  Growth was from the addition of a small number of very large accounts.

VFIIX (VANGUARD GOVERNMENT NATIONAL MORTGAGE ASSOCIATION FUND)

  • The fund moved from 199th to 14th across the AP universe, with AUM increasing nearly eight-fold (up 786.5%).  Five new advisory firms and 14 new accounts were added for this fund.
  • Virtually all growth occurred within the largest accounts, where AUM increased by 862.8% with the addition of 12 new accounts and 4 new advisory firms.

PYCBX (PAYDEN CORE BOND FUND)
WIIEX (WILLIAM BLAIR INSTITUTIONAL INTERNATIONAL EQUITY FUND)
MKIEX (MCKEE INTERNATIONAL EQUITY FUND)

  • The above three funds now appear in the top 25 funds across the AP universe, with ranks of 6, 20, and 21 respectively.  Previously, they were not ranked among the over 3,000 funds in our universe.
  • This growth is due to the adoption of these funds by advisors in the largest accounts.

Funds Exhibiting Significant Losses

GLD (STREETTRACKS GOLD TRUST)

  • Fund dropped from 9th to 37th overall in the AP universe.
  • AUM dropped by 47.1% across the AP universe, but is held in 54 more accounts and by 4 more advisory firms. 
  • The fund returned -5.02% in the third quarter.  Advisors have significantly reduced allocations to gold.  Since the number of accounts increased, advisors are maintaining some allocation in almost all accounts.

Methodology

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. 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

In some cases, funds moved down in ranking, but their 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 is our guiding criterion in this analysis. We look 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 eliminate situations where changes in fund usage were due to movements between account tiers. Some subjective judgment comes into play. We do not have a single objective metric or standard that allows 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.

Finally, we consolidate holdings across share classes for a given fund.  The ticker symbol displayed is the first symbol, alphabetically, among the various share classes. It may not be representative of the share class or classes held in the AP universe.

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