Over the 12 month period, foreign equity funds in the AP universe significantly outperformed their benchmark, delivering an average performance of 4.08%, compared to -2.76% for their benchmark, the EFA exchange traded fund.  Of the top 25 foreign equity funds, 18 outperformed their benchmark over this period, with five funds (AEPGX, MACSX, HAINX, ANWPX, and FICDX) outperforming the benchmark in all four quarters.  Muni bond funds also performed consistently above their benchmark for the 12 month period, with 15 of 25 funds outperforming the Lehman Muni Bond Index.  Of the 25 US equity funds, 12 outperformed the S&P 500 for the 12 month period.  Taxable bond funds fared the worst, with only 4 funds outperforming the Lehman AGG over the 12 month period.

Detailed findings of the current study are as follows:

• US Equities:  For Q1 of 2008, the top 25 funds outperformed the S&P 500 by 55 basis points (-8.89% versus -9.44%), with 14 of 25 funds beating the benchmark.  For the 12 month period, these 25 funds underperformed the S&P 500 by 92 basis points (-6.07% versus -5.85%), with only 12 of 25 funds beating the benchmark.  The most popular fund, the Growth of America Fund (AGTHX), was also the only fund to outperform the index in all four quarters.  The sixth most popular fund, the Fidelity Contrafund (FCNTX) had the best outperformance against the S&P 500 (beating the benchmark by 10.02%) over the 12 month period.  Of the 25 funds, 15 outperformed their secondary, style box-specific benchmarks for the 12 month period.

• Foreign Equities:  For Q1 of 2008, only 9 of the 25 funds outperformed the benchmark, but average performance across all 25 funds was 2 basis points above the benchmark (-8.79% versus -8.81%).  As we note above, for the 12 month period, foreign equities consistently outperformed their benchmark, the EFA.  Three of the 25 funds (FEMKX, SSEMX, and HLEMX) are emerging market funds, and these funds each outperformed the EEM exchange traded fund, a more appropriate benchmark.

• Taxable Bonds:  For Q1 of 2008, only 4 of 25 funds outperformed the Lehman AGG benchmark, and the 25 funds on average underperformed the AGG by 336 basis points (-1.02% versus 2.34%).  Overall underperformance was influenced by the Schwab Yield Plus Fund (SWYPX), which returned -19.87% for the quarter and has been scrutinized widely in the media.  For the 12 month period, performance across the 25 funds has been equally disappointing, with only 4 of 25 funds outperforming the AGG.  The 25 funds underperformed the AGG by 541 basis points over the 12 months (2.16% versus 7.57%)

• Muni Bond Funds:  For Q1 of 2008, 19 of 25 muni bond funds outperformed the Lehman muni bond exchange traded fund TFI (we began using this ETF as the benchmark on 1/1/08).  The 25 funds outperformed the TFI by 78 basis points (-.45% versus -1.23%).  For the 12 month period, 15 of 25 funds outperformed the benchmark, but overall underperformed the benchmark by 15 basis points (1.34% versus 1.49%).

The results for Q1 of 2008 are summarized below:

The results for the prior 12 months are summarized below:

Background and Methodology

The Advisor Perspectives universe tracks the investments of high- and ultra-high net worth investors whose assets are managed by Registered Investment Advisors.  The size of the universe is approximately $50 billion and the average account size is approximately $900,000.  However, 94% of the assets are concentrated in a group of accounts with an average account size of approximately $4 million, so data from the universe is biased by this demographic, and therefore represents the investment decisions of ultra-high net worth investors.

The most popular mutual funds are determined based on the AUM (assets under management) for each fund within the Advisor Perspectives universe.  The inception of the Advisor Perspectives service was in Q1 of 2007.  The first complete calendar quarter of data was Q2 of 2007.

The funds used in this study were the most popular funds as of March 31, 2007.  Only actively managed funds were considered; index funds, enhanced index funds, and ETFs were not included in this study.

To calculate the AUM of each fund, assets are consolidated across all share classes held in the Advisor Perspectives universe.  For this study, performance data was obtained for the share class most appropriate for advisors (either a load-waived share class or an institutional share class).

Performance data and style-box classifications were obtained from Morningstar.
Detailed data is presented in the four tables below.

US Equities

(LC = Large Cap; MC = Mid Cap; SC = Small Cap)
(G = Growth; B = Blend; V = Value)

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