Equity Income Funds May Offer Safe Harbor in Turbulent Market, Says S&P Fund Services Research

Apr 17, 2001, 01:00 ET from Standard & Poor's Fund Services Research

    NEW YORK, April 17 /PRNewswire/ -- Equity income funds may provide a safe
 harbor in the current market turbulence, according to Standard & Poor's Fund
 Services Research.
     "Equity income funds performance pattern is almost identical to large cap
 value funds, but they are slightly more stable than large cap value due to
 their limited volatility of returns and relatively minimal dispersion around
 median returns," said Rosanne Pane, director of Standard & Poor's Fund
 Services.
     In an article published today in the Select Fund Bulletin, the researchers
 state that equity income funds seek to provide a high level of current income
 for their shareholders typically by investing at least 65% of its assets in
 stocks that pay dividends.  The total return for an equity income fund should
 be viewed as the combination of receiving high dividend payments and the
 capital appreciation earned on the stocks held in the portfolio.  Stocks that
 pay high dividends tend to represent companies in the mature stage of their
 lifecycle with a stable growth rate and while they may not provide large
 upside potential, there is a large degree of downside protection.  In a
 downward market, it is the downside protection that is invaluable.
     According to Standard & Poor's Fund Services research, equity income funds
 should be considered within the large cap value style category.  Using
 three- and five-year rolling periods over 10 years through January 31, 2001,
 it was found that equity income funds have a 99% correlation to large cap
 value funds
     The table below details the annualized average of the peer group's top
 fund return, median fund return and bottom fund return based on rolling
 three-year periods through January 31, 2001, in addition to the average
 dispersion around the median.  Similar results were found using rolling
 five-year periods also.
 
     Rolling Three Year Performance    Equity Income           LCV          LCB
     Peer Group                             Ann. Avg      Ann. Avg     Ann. Avg
 
     High                                      20.56         28.38        35.40
     Median                                    14.70         15.38        18.11
     Low                                        8.12         -9.21         4.94
     High-Median Dispersion                     5.86         13.00        17.29
     Median-Low Dispersion                      6.58         24.60        13.17
 
     Zoe Gleadhall, ratings specialist, commented, "The low values for the
 dispersion around the median for the equity income peer group demonstrates the
 narrowness of return spread for the group compared to both the large cap value
 and large cap blend peer groups. While equity income funds on average did not
 outperform large cap value funds over any period, the downside of equity
 income funds is significantly less than for any style category within the
 large cap classification."
     On examination of the large cap styles for the 12 month period ending
 March 30, 2001, the downside protection provided by equity income funds was
 further exemplified.  It found that on average the maximum loss over this
 period for an equity income fund was -9.05%, slightly better than the maximum
 loss for the average large cap value fund at -10.05%.  For the average growth
 fund, the maximum loss was -36.90% while the average blend fund had a maximum
 loss of -23.56%.
     Another example of the downside protection comes from comparison of
 Vanguard Equity Income Fund to the highly aggressive Janus Twenty Fund.  In
 the 12 months through to March 30, 2001 the Vanguard fund returned 9.62%, with
 volatility of 10.16% while the Janus fund returned -51.70%, with volatility of
 30.09%.
     Listed below is the current list of Standard & Poor's Select Funds that
 are considered Equity Income, along with their current performance record.
 
     Performance through to 3/30/01
                                             3 Yrs             5 Yrs
                                          Annualized        Annualized
 
                                        Rtn       Vol      Rtn       Vol
     S&P 500 (Composite)               3.06     18.54    14.17     17.11
     S&P/BARRA 500 Value               4.74     17.95    13.82     16.38
     Large Cap Value Median            2.29     17.12    11.45     15.45
 
     Chase Vista Equity Income         2.67     15.63    12.29     14.80
     Merrill Equity Income
      (formerly Strategic Dividend)    3.30     14.72    12.09     13.32
     Pioneer Equity Income             4.57     14.33    13.32     13.25
     Vanguard Equity Income            4.46     14.94    13.57     13.47
     Washington Mutual Investor        4.93     15.93    14.83     14.70
 
     Standard & Poor's Select Funds is a trademarked label awarded to a small
 number of funds whose consistency of performance and quality of management
 indicate a continuing level of excellence. Each Select seal represents a
 quality assessment by experienced analysts who incorporate into their ratings
 extensive, in-person evaluations of a fund's management. There are currently
 fewer than 300 mutual funds that have earned Select Fund status.  Standard &
 Poor's provides on-going monitoring to ensure that each Select Fund continues
 to meet our criteria.
 
     Standard & Poor's Fund Services tracks the performance of nearly
 60,000 institutional, pension, insurance, and mutual funds worldwide.  With
 400 professionals in 13 countries who track and analyze funds,
 Standard & Poor's is the world's leading provider of mutual fund information
 and analysis.
 
     Standard & Poor's, a division of The McGraw-Hill Companies Inc.
 (NYSE:   MHP), provides independent financial information, analytical services,
 and credit ratings to the world's financial markets. Among the company's many
 products are the S&P 1200, the premier global equity performance benchmark;
 the S&P 500, the premier U.S. portfolio index; and Credit Market Services,
 offering credit ratings on more than 220,000 securities and funds worldwide.
 
     Further details on the Select Fund service can be found at:
 http://www.standardandpoors.com/onfunds.
 
 

SOURCE Standard & Poor's Fund Services Research
    NEW YORK, April 17 /PRNewswire/ -- Equity income funds may provide a safe
 harbor in the current market turbulence, according to Standard & Poor's Fund
 Services Research.
     "Equity income funds performance pattern is almost identical to large cap
 value funds, but they are slightly more stable than large cap value due to
 their limited volatility of returns and relatively minimal dispersion around
 median returns," said Rosanne Pane, director of Standard & Poor's Fund
 Services.
     In an article published today in the Select Fund Bulletin, the researchers
 state that equity income funds seek to provide a high level of current income
 for their shareholders typically by investing at least 65% of its assets in
 stocks that pay dividends.  The total return for an equity income fund should
 be viewed as the combination of receiving high dividend payments and the
 capital appreciation earned on the stocks held in the portfolio.  Stocks that
 pay high dividends tend to represent companies in the mature stage of their
 lifecycle with a stable growth rate and while they may not provide large
 upside potential, there is a large degree of downside protection.  In a
 downward market, it is the downside protection that is invaluable.
     According to Standard & Poor's Fund Services research, equity income funds
 should be considered within the large cap value style category.  Using
 three- and five-year rolling periods over 10 years through January 31, 2001,
 it was found that equity income funds have a 99% correlation to large cap
 value funds
     The table below details the annualized average of the peer group's top
 fund return, median fund return and bottom fund return based on rolling
 three-year periods through January 31, 2001, in addition to the average
 dispersion around the median.  Similar results were found using rolling
 five-year periods also.
 
     Rolling Three Year Performance    Equity Income           LCV          LCB
     Peer Group                             Ann. Avg      Ann. Avg     Ann. Avg
 
     High                                      20.56         28.38        35.40
     Median                                    14.70         15.38        18.11
     Low                                        8.12         -9.21         4.94
     High-Median Dispersion                     5.86         13.00        17.29
     Median-Low Dispersion                      6.58         24.60        13.17
 
     Zoe Gleadhall, ratings specialist, commented, "The low values for the
 dispersion around the median for the equity income peer group demonstrates the
 narrowness of return spread for the group compared to both the large cap value
 and large cap blend peer groups. While equity income funds on average did not
 outperform large cap value funds over any period, the downside of equity
 income funds is significantly less than for any style category within the
 large cap classification."
     On examination of the large cap styles for the 12 month period ending
 March 30, 2001, the downside protection provided by equity income funds was
 further exemplified.  It found that on average the maximum loss over this
 period for an equity income fund was -9.05%, slightly better than the maximum
 loss for the average large cap value fund at -10.05%.  For the average growth
 fund, the maximum loss was -36.90% while the average blend fund had a maximum
 loss of -23.56%.
     Another example of the downside protection comes from comparison of
 Vanguard Equity Income Fund to the highly aggressive Janus Twenty Fund.  In
 the 12 months through to March 30, 2001 the Vanguard fund returned 9.62%, with
 volatility of 10.16% while the Janus fund returned -51.70%, with volatility of
 30.09%.
     Listed below is the current list of Standard & Poor's Select Funds that
 are considered Equity Income, along with their current performance record.
 
     Performance through to 3/30/01
                                             3 Yrs             5 Yrs
                                          Annualized        Annualized
 
                                        Rtn       Vol      Rtn       Vol
     S&P 500 (Composite)               3.06     18.54    14.17     17.11
     S&P/BARRA 500 Value               4.74     17.95    13.82     16.38
     Large Cap Value Median            2.29     17.12    11.45     15.45
 
     Chase Vista Equity Income         2.67     15.63    12.29     14.80
     Merrill Equity Income
      (formerly Strategic Dividend)    3.30     14.72    12.09     13.32
     Pioneer Equity Income             4.57     14.33    13.32     13.25
     Vanguard Equity Income            4.46     14.94    13.57     13.47
     Washington Mutual Investor        4.93     15.93    14.83     14.70
 
     Standard & Poor's Select Funds is a trademarked label awarded to a small
 number of funds whose consistency of performance and quality of management
 indicate a continuing level of excellence. Each Select seal represents a
 quality assessment by experienced analysts who incorporate into their ratings
 extensive, in-person evaluations of a fund's management. There are currently
 fewer than 300 mutual funds that have earned Select Fund status.  Standard &
 Poor's provides on-going monitoring to ensure that each Select Fund continues
 to meet our criteria.
 
     Standard & Poor's Fund Services tracks the performance of nearly
 60,000 institutional, pension, insurance, and mutual funds worldwide.  With
 400 professionals in 13 countries who track and analyze funds,
 Standard & Poor's is the world's leading provider of mutual fund information
 and analysis.
 
     Standard & Poor's, a division of The McGraw-Hill Companies Inc.
 (NYSE:   MHP), provides independent financial information, analytical services,
 and credit ratings to the world's financial markets. Among the company's many
 products are the S&P 1200, the premier global equity performance benchmark;
 the S&P 500, the premier U.S. portfolio index; and Credit Market Services,
 offering credit ratings on more than 220,000 securities and funds worldwide.
 
     Further details on the Select Fund service can be found at:
 http://www.standardandpoors.com/onfunds.
 
 SOURCE  Standard & Poor's Fund Services Research

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