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TheStreet.com Ratings: The Top 5 'Ultra' Funds

Kevin Baker

Are you trying to figure out where to plant your retirement nest egg? Your adviser may have suggested picking a large fund family to maximize your mutual fund choices while minimizing your transaction costs. That's good advice, but simply having the most funds does not mean having the best funds.

How do you narrow down the list of hundreds of large fund families to the top-five "ultra" fund families?

Four times a year, TheStreet.com Ratings will publish a guide to stock mutual funds, which is a compilation of investment ratings and analyses covering more than 10,000 equity and balanced mutual funds. To be an "ultra" fund family, the fund group must compete in a king-of-the-hill-type competition to see which family can get the most funds onto our guide's list of the top 200 funds.

From the TheStreet.com Ratings' forthcoming summer survey, here are the top 5 "ultra" fund families.

MFS is the king of the hill with 13 separate funds in our top 200 list. Impressively, this was done with various share classes of six different funds.

The best of the bunch is the (MIDRX Quote)MFS International New Discovery R3 fund, which ranks in the 94th percentile of its peers and boasts a three-year annualized total return of 28.6%.

As of July 31, the fund's top-three holdings include Aflac (AFL Quote), Continental AG and British Energy Group, with the top-three country weightings of 17% Japan, 13.5% United Kingdom and 8.6% Germany.

This fund has been managed by David Antonelli since 1997, who was joined by Ted Barksdale and Peter Fruzzetti in 2004. The fund will be closed to certain new investors on Sept. 1. So, you need to act quickly if you want in.

Principal Financial Group (PFG Quote) ranks second on our list with 12 funds.

Of these, the top-rated fund is the (PIIIX Quote)Principal Investors Diversified International Institutional fund (PIIIX), which ranks in the 93rd percentile with a three-year annualized total return of 27.4%. The fund has three portfolio managers: Paul Blankenhagen (since 2003), Juliet Cohn (2004) and Christopher Ibach (2005).

The largest holding, HSBC, represents only 1.3% of assets, with additional large holdings including Toyota Motor (TM Quote), Total SA (TOT Quote), UBS (UBS Quote) and BHP Billiton (BHP Quote). Of the fund's assets, 59.6% are in European stocks, followed by 34% in Japan and the Pacific Rim.

Dreyfus ranks third in our survey and has 11 of the top 200 spots.

All five classes of Dreyfus' Premier Small-Cap funds are closed to new investments, so the top-ranked choice right now is (DIETX Quote)Dreyfus Premier International Equity R fund, which has a three-year total annualized return of 26.8%. The two portfolio managers that have guided the fund over that entire period are Remi Browne and Peter Carpenter.

With 71.6% of assets in European equities and the remainder in the Asian Pacific region, their fund's top holdings include ING Groep N.V., Societe Generale and BP (BP Quote). The fund's largest industry concentration is in banking, at 15.6%, followed by capital goods at 9%, materials at 8.9% and energy at 8.3%.

Vanguard has 10 top-rated funds, including the (VGELX Quote)Vanguard Energy Admiral fund, which ranks in the highest-possible 99th percentile with a total return of 39.8% annually in the last three years.

The fund has two independent investment advisers. Wellington Management began advising the fund starting in 1984, utilizing the expertise of portfolio managers Karl Bandtel since 1992 and James Bevilacqua since 1998. The other adviser, The Vanguard Group, began advising the energy fund in 2005 under the portfolio management of Joel Dickson.

As of July 31, the fund's top holdings included Total, Exxon Mobil (XOM Quote), Chevron (CVX Quote), ConocoPhillips (COP Quote) and Valero Energy (VLO Quote). More than half the fund is invested in integrated oil and gas companies, with the remainder spread between services, exploration and refining.

AIM Investments rounds out our top five with 10 funds on the list. Vanguard edged AIM due to less cloning. (Generally speaking, the rankings do not discriminate against fund cloning. On the contrary, replicating successful strategies of well-managed funds for new investors should be encouraged.)

Seven of AIM's top funds are closed to new investments, including AIM European Small Company C, A, and B shares and AIM International Small Co C, A, and B shares, which captured the six top spots among all the stock mutual funds we rate. Also closed to new investment is their AIM European Growth Inv fund. But due to the miracle of cloning, the (AEDCX Quote)AIM European Growth C is open to new investments.

As of June 30, AEDCX ranked in the 95th percentile, averaging a total return of 29.7% annually in the last three years. As of July 31, the fund geographically diversified its asset holdings in Europe with a 20.2% concentration in the U.K., 12.5% in France and 11.3% in Germany. With 12.1% in banking and 6% in pharmaceuticals, the fund also holds from 3%-5% of assets in various industries, including construction, oil and gas, packaged foods, machinery, and casinos and gaming.

The largest holdings are Anglo Irish Bank and Puma AG, but each represents less than 2.3% of assets.

Because past performance is not a guarantee of future results, it will be interesting to see which fund families stay on the list, move up or move down in the ranking. Plus, you should never buy a fund without reading its prospectus first to see if the fund fits into your overall investment plan.