Actively managed mutual funds used by Registered Investment Advisors (RIAs) in the Advisor Perspectives (AP) Universe outperformed their respective benchmarks during the second quarter of 2007, and had above average peer group rankings.  Overall, taxable funds did not outperform the S&P 500, but that is a direct consequence of the diversified nature of a portfolio containing these funds, including the fact that nearly 50% of funds in this study hold non-US assets.

The top performing funds included the following:

This study examined the 25 mutual funds with the highest market value among the largest accounts in the AP universe.  The largest accounts have an average account size of approximately $3.7 million.  Our hypothesis is that RIAs will invest in top performing funds for their largest accounts, and the results of this study – although encompassing only a three month period – confirm this hypothesis.  As a point of reference, we also studied the 25 funds with the largest market value in the entire AP universe, with accounts averaging $900k.

The AP universe contains approximately $50 billion of assets managed by RIAs on behalf of high net worth (HNW) and ultra-high net worth (UHNW) investors.  Approximately 14% of the marketable securities in the AP universe are held in mutual funds (including ETFs) and the remainder is held in individual securities, mostly through separately managed accounts (SMAs). The funds with the largest market value in the AP universe represent approximately 94% of the assets in the AP universe, so the results from these two data sets are fairly similar.

This study was based on fund holdings within the Advisor Perspectives universe as of March 31, 2007. 

For the 25 funds with the largest market value in the largest accounts (View Data), the key findings were:

• Among the taxable funds, the weighted average return was 5.46%, with a weighted standard deviation of 8.96.  The S&P 500, based on the returns from the Vanguard 500 Index Fund (VFIAX) returned 6.26% with a standard deviation of 7.39. 
• Actively managed funds outperformed their respective indices by .34% (based on a weighted average).  Of the 18 actively managed funds, 11 outperformed their respective benchmarks.
• Actively managed funds ranked in the 47th percentile of their peer groups (based on a weighted average)
• Approximately 49% of the assets in these funds are invested in funds with non-US holdings

The data on the individual funds is shown in Table 1 (View PDF).

For the 25 funds with the largest market value in the AP universe (View Data), the key findings were:

• Among the taxable funds, the weighted average return was 5.58%, with a weighted standard deviation of 8.84.
• Actively managed funds outperformed their respective indices by .42% (based on a weighted average).  Of the 18 actively managed funds, 12 outperformed their respective benchmarks.

• Actively managed funds ranked in the 44th percentile of their peer groups (based on a weighted average)
• Approximately 46% of the assets in these funds are invested in funds with non-US holdings

The data on the individual funds is shown in Table 2 (View PDF).

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