Few Top Performing Mutual Funds Repeat Past Performance, Says S&P

Latest S&P Scorecard Evaluates Consistency of Mutual Fund Performance



Aug 14, 2006, 01:00 ET from Standard & Poor's

    NEW YORK, Aug. 14 /PRNewswire/ -- Standard & Poor's, the world's
 leading provider of independent investment research, indices and ratings,
 released today its latest mutual fund persistence scorecard that measures
 the consistency of top mutual fund performers over time. Through June 30,
 2006, Standard & Poor's scorecard shows very few funds manage to
 consistently repeat top half or top quartile performance.
     Over five-years ending June 30, 2006, only 58 (10.8%) large-cap funds,
 12 (7.9%) mid-cap funds, and 19 (7.7%) small-cap funds maintained a
 top-half ranking over five consecutive 12-month periods. A total of 3
 large-cap funds (1.12%), zero mid-cap funds and 1 small-cap fund (0.81%)
 maintained a top-quartile ranking over the same period.
     "Standard & Poor's research shows that very few funds manage to
 consistently repeat top half or top quartile performance," says Srikant
 Dash, Index Strategist at Standard & Poor's. "The low count of mutual funds
 that consistently maintain top quartile rankings is a sobering reminder
 about the risks of chasing past performance."
     Looking at longer time horizons, only 17.5% of large-cap funds with a
 top quartile ranking over five years ending June 30, 2001 maintained a top
 quartile ranking over the next five years ending June 30, 2006. Only 6.8%
 of mid-cap funds and 18.7% of small-cap funds repeated their top quartile
 performance over the same period. Similarly, 36.3% of large cap funds,
 26.4% of mid cap funds and 47.0% of small cap funds with a top half ranking
 over five years ending June 30, 2001 maintained a top half ranking over the
 next five years ending June 30, 2006.
     "Our research has found that consistent, top performing funds tend to
 share similar characteristics, in particular, more experienced management
 teams which can successfully maneuver their funds through volatile
 markets," says Rosanne Pane, Mutual Fund Strategist at Standard & Poor's.
 "Consistent, top performers also tend to have lower expense ratios, and
 minimize the expense drag on performance."
     Survivorship
     Fourth quartile funds continue to have a higher probability of
 disappearing. The five-year transition matrix notes that 41.9% of
 large-cap, 41.9% of mid-cap, and 39.2% of small-cap 4th quartile funds
 disappeared due to mergers or liquidations.
     Standard & Poor's Mutual Fund Performance Persistence Scorecard is the
 only comprehensive, periodic, and publicly available source of such data.
 The complete semi-annual scorecard is available at
 http://www.standardandpoors.com.
     About Standard & Poor's Mutual Fund Performance Persistence Scorecard
     The semi-annual S&P Mutual Fund Performance Persistence Scorecard
 tracks consistency of top performers over three and five consecutive-year
 periods and measures performance consistency, corrected for survivorship
 bias, through transition matrices for one, three- and five-year
 non-overlapping holding periods.
     The methodology is designed to provide historical rankings without
 survivorship bias. The scorecard presents top-quartile and top-half
 performance results over three and five consecutive years. Additionally,
 transition matrices highlight the movements between quartiles and halves
 for two non-overlapping one-, three-, and five-year time periods. The
 scorecard also provides averages of various factors (expenses, manager
 tenure, etc.) in comparing consistently top ranking funds versus their peer
 universe.
     About Standard & Poor's
     Standard & Poor's, a division of The McGraw-Hill Companies (NYSE:   MHP),
 is the world's foremost provider of financial market intelligence,
 including independent credit ratings, indices, risk evaluation, investment
 research and data. With approximately 7,500 employees, including wholly
 owned affiliates, located in 21 countries, Standard & Poor's is an
 essential part of the world's financial infrastructure and has played a
 leading role for more than 140 years in providing investors with the
 independent benchmarks they need to feel more confident about their
 investment and financial decisions. For more information, visit
 http://www.standardandpoors.com.
 
 

SOURCE Standard & Poor's
    NEW YORK, Aug. 14 /PRNewswire/ -- Standard & Poor's, the world's
 leading provider of independent investment research, indices and ratings,
 released today its latest mutual fund persistence scorecard that measures
 the consistency of top mutual fund performers over time. Through June 30,
 2006, Standard & Poor's scorecard shows very few funds manage to
 consistently repeat top half or top quartile performance.
     Over five-years ending June 30, 2006, only 58 (10.8%) large-cap funds,
 12 (7.9%) mid-cap funds, and 19 (7.7%) small-cap funds maintained a
 top-half ranking over five consecutive 12-month periods. A total of 3
 large-cap funds (1.12%), zero mid-cap funds and 1 small-cap fund (0.81%)
 maintained a top-quartile ranking over the same period.
     "Standard & Poor's research shows that very few funds manage to
 consistently repeat top half or top quartile performance," says Srikant
 Dash, Index Strategist at Standard & Poor's. "The low count of mutual funds
 that consistently maintain top quartile rankings is a sobering reminder
 about the risks of chasing past performance."
     Looking at longer time horizons, only 17.5% of large-cap funds with a
 top quartile ranking over five years ending June 30, 2001 maintained a top
 quartile ranking over the next five years ending June 30, 2006. Only 6.8%
 of mid-cap funds and 18.7% of small-cap funds repeated their top quartile
 performance over the same period. Similarly, 36.3% of large cap funds,
 26.4% of mid cap funds and 47.0% of small cap funds with a top half ranking
 over five years ending June 30, 2001 maintained a top half ranking over the
 next five years ending June 30, 2006.
     "Our research has found that consistent, top performing funds tend to
 share similar characteristics, in particular, more experienced management
 teams which can successfully maneuver their funds through volatile
 markets," says Rosanne Pane, Mutual Fund Strategist at Standard & Poor's.
 "Consistent, top performers also tend to have lower expense ratios, and
 minimize the expense drag on performance."
     Survivorship
     Fourth quartile funds continue to have a higher probability of
 disappearing. The five-year transition matrix notes that 41.9% of
 large-cap, 41.9% of mid-cap, and 39.2% of small-cap 4th quartile funds
 disappeared due to mergers or liquidations.
     Standard & Poor's Mutual Fund Performance Persistence Scorecard is the
 only comprehensive, periodic, and publicly available source of such data.
 The complete semi-annual scorecard is available at
 http://www.standardandpoors.com.
     About Standard & Poor's Mutual Fund Performance Persistence Scorecard
     The semi-annual S&P Mutual Fund Performance Persistence Scorecard
 tracks consistency of top performers over three and five consecutive-year
 periods and measures performance consistency, corrected for survivorship
 bias, through transition matrices for one, three- and five-year
 non-overlapping holding periods.
     The methodology is designed to provide historical rankings without
 survivorship bias. The scorecard presents top-quartile and top-half
 performance results over three and five consecutive years. Additionally,
 transition matrices highlight the movements between quartiles and halves
 for two non-overlapping one-, three-, and five-year time periods. The
 scorecard also provides averages of various factors (expenses, manager
 tenure, etc.) in comparing consistently top ranking funds versus their peer
 universe.
     About Standard & Poor's
     Standard & Poor's, a division of The McGraw-Hill Companies (NYSE:   MHP),
 is the world's foremost provider of financial market intelligence,
 including independent credit ratings, indices, risk evaluation, investment
 research and data. With approximately 7,500 employees, including wholly
 owned affiliates, located in 21 countries, Standard & Poor's is an
 essential part of the world's financial infrastructure and has played a
 leading role for more than 140 years in providing investors with the
 independent benchmarks they need to feel more confident about their
 investment and financial decisions. For more information, visit
 http://www.standardandpoors.com.
 
 SOURCE Standard & Poor's

RELATED LINKS

http://www.wavephore.com