S&P: Top funds failed to repeat

Jan 29, 2007 @ 12:52 pm

By Kathie O’Donnell

Standard & Poor’s latest mutual fund persistence scorecard, which measures the consistency of top mutual funds, showed that in 2006 “very few” funds consistently managed to repeat top-half or top-quartile performance.

For the five years ended Dec. 31, just 13.2% of large-cap, 9.9% of mid-cap and 10% of small-cap funds maintained a top-half ranking over five consecutive 12-month periods, S&P, a unit of New York-based The McGraw-Hill Companies Inc., said.

Just 3% of large-cap, 2.5% of mid-cap and no small-cap funds maintained a top-quartile ranking over the same period, S&P said.

“Standard & Poor’s research suggests that screening for top-quartile funds, as the sole basis for an investment decision, is inappropriate,” Srikant Dash, index strategist at Standard & Poor’s, said in a statement.

Few funds repeat a top-quartile performance, he said.

“Standard & Poor’s research shows that a healthy percentage, and in most cases a majority, of top-quartile funds in the future will most likely come from the ranks of prior period second and third quartiles,” Mr. Dash said.

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