Markets & Finance

Funds with Legs for the Long Run


A Standard & Poor's Persistence Scorecard highlights mutual funds that steadily beat their peers over the past five years

Past performance may not be a guarantee of future results, but it can help identify some worthy mutual funds. The semiannual S&P Mutual Fund Performance Persistence Scorecard tracks the consistency of top performers over consecutive three- and five-year periods. The survey uses "apples to apples" comparisons, so large-cap funds vie with other large-caps, not with mid- or small-cap portfolios.

Very few funds manage to repeat top-half or top-quartile performance. Only 71 (or 13.2% of) large-cap funds, 16 (9.9%) mid-cap funds, and 24 (10%) small-cap funds maintained a top-half ranking over five consecutive 12-month periods ended December 31, 2006. Only eight (3%) large-cap funds, two (2.5%) mid-cap funds, and no small-cap funds maintained a top-quartile ranking over the same period.

"This research suggests that screening for top-quartile funds may be inappropriate as the sole basis for an investment decision," says Srikant Dash, index strategist at S&P. "A majority of top-quartile funds in the future come from the ranks of prior-period second- and third-quartile performers, and the absolute counts of repeat top performers are low."

What distinguishes the top performers from the rest? We found that, in general, consistently strong funds have lower expense ratios than their peers and managers who have been at the helm longer. Not unsurprisingly, bottom-quartile funds were much more likely than top-quartile funds to be liquidated or merged into other portfolios.

The funds in the table below were consistently in the top half of performers in the latest S&P survey. They are all open to new investors, have no front-end loads and what we consider reasonable expense ratios. In addition, they all had five-year annualized returns of at least 10% through Dec. 31, 2006.

Consistent Performers

Fund name

Symbol

S&P Ranking

Turnover (%)

12-Month Return (%)

3-Year Return (%)

5-Year Return (%)

LARGE-CAP FUNDS

Amana Trust Income

AMANX

4

10

21.2

18.0

12.2

Am. Beacon Large Cap Value

AAGPX

5

25

18.7

15.7

12.0

Cambiar Opportunity

CAMOX

3

38

16.6

12.8

10.2

Marsico 21st Century

MXXIX

5

136

18.6

16.1

15.8

Target Large Cap Value

TALVX

4

90

19.3

14.7

12.2

TCW Diversified Value

TGDVX

4

35

18.5

15.1

10.9

Vanguard Windsor II

VWNFX

4

28

18.2

14.4

10.1

S&P 500

15.8

10.4

6.2

MID-CAP FUNDS

Accessor Small/Mid Cap

ASMCX

4

42

13.7

15.2

13.4

Fidelity Leveraged Co. Stock

FLVCX

5

23

17.6

19.8

27.1

Janus Mid Cap Value

JMCVX

4

86

15.3

14.6

12.8

Vanguard Selected Value

VASVX

5

28

19.1

16.6

14.1

Vanguard Strategic Equity

VSEQX

3

75

13.4

14.5

13.4

Westcore Mid Cap Value

WTMCX

3

49

12.2

16.2

12.0

S&P MidCap 400

10.3

13.1

10.9

SMALL-CAP FUNDS

Columbia Acorn

ACRNX

5

16

14.5

16.3

14.7

Perritt Micro Cap Opportunities

PRCGX

5

24

13.7

15.1

20.2

Stratton Small Cap Value

STSCX

3

15

13.8

16.8

16.7

Target Small Cap Value

TASVX

5

118

17.7

17.1

16.7

S&P SmallCap 600

15.1

15.0

12.5

And here's a list of the top 10 funds among large-cap, mid-cap, and small-cap equity funds, ranked by five-year annualized returns through Dec. 31, 2006.

Top Ten Funds (ranked by five-year annualized returns in each category)

Fund Name

Symbol

Five-Year Return (annualized %)

Fund Status

Large Cap

Marsico 21st Century

MXXIX

15.83

Open

HW Large Cap Value/I

HWLIX

14.28

Closed

RiverSource Dvsfd Eq/A

INDZX

13.17

Open

Dodge & Cox Stock

DODGX

12.84

Closed

Am Beacon LCVl/AMR

AAGAX

12.56

Open

DFA US Large Cap Val III

DFUVX

12.48

Open

DFA US Large Cap Val II

DFCVX

12.46

Open

LWAS/DFA US Hi Bk to Mkt

DFBMX

12.28

Open

Target:Large Cap Value

TALVX

12.23

Open

Amana Mutual Fd Tr Income

AMANX

12.17

Open

S&P 500 Index

6.19

Mid Cap

Fidelity Leveraged Co Stk

FLVCX

27.08

Open

HW Mid-Cap Value/I

HWMIX

17.92

Closed

Artisan Mid Cap Value

ARTQX

16.96

Closed

SEI Instl Mgd Mid-Cp/A

SEMCX

14.29

Open

Columbia Mid Cap Val/Z

NAMAX

14.21

Open

Vanguard Selected Value

VASVX

14.12

Open

n/i numeric inv MidCap

NIGVX

13.81

Open

Vanguard Strategic Eqty

VSEQX

13.43

Open

Accessor:Sm to Mid Cp/Adv

ASMCX

13.38

Open

Rainier:Small/Md Cp Eq

RIMSX

13.09

Closed

S&P Midcap 400 Index

10.88


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