Morningstar recently put out a very interesting piece of information regarding the top mutual fund families in the past three years. They took the 20 largest domestic equity fund families, looked at the three-year percentile performance rank for their stock funds, then weighted the those percentile ranks based on where the asset base was three years ago. Weighting the asset base to three years ago certainly makes the formula more complicated, but it also makes it much more accurate because it doesn't allow the fund flows toward those best performing funds to slant the data in their direction so much.
The results of this study are very interesting. Janus turns out to be the mutual fund family that has had the best performance from its funds in the last three years, closely followed by the Hartford Mutual Funds. Janus has a stable of top performing funds like Janus Twenty, Janus Orion, and Janus Contrarian, which have helped them vault to the top of the list.
The part I find very interesting is to see what fund families have made positive moves since this same test three years ago, and which families have slid since that study. Dodge and Cox has had a very large slide to the 35th percentile from the 1st percentile just three years ago. Obviously the funds have still done reasonably well, but they haven't lived up to the huge expectations put on them in the last few years. Also notable is the significant drop that Vanguard has seen in the past three years. Vanguard is quite possibly the most respected mutual fund company out there, and for good reason, but it has certainly experienced harder times of late on the performance side. It is now ranked in the 42nd percentile instead of the 29th as it was three years ago. American Century Investments is probably the most significant loser in this study, falling from a very respectable 31st percentile, to a disapponting 64th percentile.
The Putnam funds continue to languish, bringing up the rear by quite a bit in this study. Three years ago the fund was a disappointing 60th percentile in the ranking, but now it is a terrible 80th percentile. For a fund family that has undergone as much scrutiny as Putnam to be ranked in the bottom 20% of all funds has to be very disheartening to investors.
Keep track of how your mutual funds are doing and hold them accountable, but remember to look at past track records and don't just look at the most recent period which can be very volatile.
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