How Did the Biggest Funds of 10 Years Ago Fare?
What these large blend hits and misses mean for investors.
It's time for a little hindsight analysis. Recently we've been looking at our fund recommendations over the years in an effort to learn from our past mistakes and success. My colleague Russ Kinnel recently took a close look at the performance of our Fund Analyst Picks--our favorite funds in each Morningstar category. Our batting average has been a solid .675 overall.
In this article, we're going to focus on one category--large blend, the largest of our U.S. domestic-equity categories--to see how the largest funds in the category at the beginning of that span (for which we have published analyses) have fared, as well as evaluate our recommendations for those funds. (It's worth noting that we haven't had Analyst Picks for 10 years, but we have been making active recommendations in our analyses.) Why 10 years? We chose such a long period because it encompasses several very different market environments, including the frenetic tail end of the late 1990s' bull-market run-up, the bear market, and the ensuing equity rally that has been led by smaller, more-leveraged fare than the previous bull market. That makes for a more level playing field, in terms of returns, for different types of investing styles.
We think it's more useful to look at our recommendations based on fund size back at the start of the period, as opposed to the 10 largest funds now. The latter funds have all been successful over the prior decade--investors tend to flock to funds with good records--while the group from 1997 has since produced divergent results, which makes for a better test.
Greg Carlson has a position in the following securities mentioned above: VINIX. Find out about Morningstar’s editorial policies.