Mutual Funds in the Advisor Perspectives Universe
Each quarter we look at the performance of the top 25 actively managed Most Popular Mutual Funds in the AP (Advisor Perspectives) universe in each of four asset classes. This is the sixth such study: previous studies were done at the ends of Q3 of 2008, Q2 of 2008, Q1 of 2008, Q4 of 2007, Q3 of 2007, and Q2 of 2007. This study analyzes the most popular funds as of March 31, 2007, and looks at performance during Q4 of 2008 and for the 21 month period ending December 31, 2008. Performance numbers for the 21 month period have been annualized.
The goal of this study, as with prior studies, is to determine whether these actively managed funds outperform their appropriate benchmarks. Our results so far show that advisors have selected funds which deliver alpha (by outperforming their benchmark) within the foreign equity and municipal bond categories.
Over the 21 month period, foreign equity funds in the AP universe outperformed their benchmarks. Foreign equity funds beat their benchmark by a significant margin (158 basis points), delivering an average performance of -25.19%, compared to -28.37% for their benchmark, the EFA exchange traded fund (ETF).
Of the top 25 foreign equity funds, 17 outperformed their benchmark over this 21 month period, with four funds (ANWPX, FICDX, AEGPX, and MACSX) outperforming the benchmark in six of the seven quarters. Another five funds beat their benchmark in five of the seven quarters.
Fixed income funds (taxable bonds and municipal bonds) delivered abysmal results in Q4. In each category, all 25 funds underperformed their benchmark in Q4. Taxable bond funds trail their benchmark by 1,098 basis points over the 21 month period, and municipal bond funds trail their benchmark by 398 basis points. The poor performance in the municipal funds was largely attributable to exceptionally bad performance by two high yield funds (NHMAX and ACTHX). Among the taxable funds, two high yield funds (OHYAX and PHDAX) skewed results downward, but a number of other funds had returns of less than 10% for the quarter.
Detailed findings of the current study are as follows:
- US Equities: For Q4 of 2008, the top 25 funds underperformed the S&P 500 by 190 basis points (-23.77% versus -21.87%), with 10 of 25 funds beating the benchmark. For the 21 month period, these 25 funds underperformed the S&P 500 by 161 basis points (-23.18% versus -21.57%), with 11 of 25 funds beating the benchmark. No funds outperformed in all seven quarters. The most popular fund, the Growth of America Fund (AGTHX), the Victory Diversified Stock Fund (SRVEX), and the Balanced Fund (ABALX) were the only funds to outperform the index in five of the seven quarters. Of the 25 funds, 12 outperformed their secondary, style box-specific benchmarks for the 21 month period.
- Foreign Equities: For Q4 of 2008, 10 of the 25 funds outperformed the benchmark, and average performance across all 25 funds was 158 basis points above the benchmark (-21.33% versus -19.75%). As we note above, for the 21 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 underperformed the EEM exchange traded fund, a more appropriate benchmark.
- Taxable Bonds: For Q4 of 2008, none of the 25 funds outperformed the Lehman/Barclay AGG benchmark, and the 25 funds on average outperformed the AGG by 1,068 basis points (-5.46% versus 5.22%). For the 21 month period, performance across the 25 funds has been disappointing, with only 3 of 25 funds outperforming the AGG. The 25 funds underperformed the AGG by 1,098 basis points over the 21 months (-4.68% versus -6.30%)
- Municipal Bond Funds: For Q4 of 2008, none of the 25 municipal bond funds outperformed the Lehman/Barclay muni bond exchange traded fund TFI (we began using this ETF as the benchmark on 1/1/08). The 25 funds underperformed the TFI by 633 basis points (-2.74% versus 3.59%). For the 21 month period, 9 of 25 funds outperformed the benchmark, and overall the 25 funds underperformed the benchmark by 398 basis points (-2.36% versus 1.62%).
The results for Q4 of 2008 are summarized below:
|
Average Return |
Benchmark Return |
Benchmark |
% of Funds Outperforming Benchmark |
US Equities |
-23.77% |
-21.87% |
SPY |
40% |
Foreign Equities |
-21.33% |
-19.75% |
EFA |
40% |
Taxable Bonds |
-5.46% |
5.22% |
AGG |
0% |
Muni Bonds |
-2.74% |
3.59% |
TFI |
0% |
The results for the prior 21 months (annualized) are summarized below:
|
Average Return |
Benchmark Return |
Benchmark |
% of Funds Outperforming Benchmark |
US Equities |
-23.18% |
-21.57% |
SPY |
44% |
Foreign Equities |
-25.19% |
-28.37% |
EFA |
68% |
Taxable Bonds |
-4.68% |
6.30% |
AGG |
12% |
Muni Bonds |
-2.36% |
1.62% |
TFI |
40% |
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 in the PDF file.
Display article as PDF for printing.
Would you like to send this article to a friend?
Remember, if you have a question or comment, send it to .
