These Eight Funds Beat Up Their Benchmarks
Joanna Ossinger
12/25/07 - 10:07 AM EST
As the mutual-fund world awaits year-end results, many people naturally are watching to see which managers will continue their streaks of consecutive years beating the
S&P 500.
But that's not the only type of streak people are watching -- a more effective tool, many experts say, is to compare each fund to its own benchmark index.
The theory goes that different asset classes can enjoy eras of outperformance, leading to distortions. The S&P 500 is a U.S-centric large-cap company index, so when small stocks, foreign stocks or sectors such as energy or financials perform particularly well, there are a lot of those types of funds that beat the S&P 500.
When funds are compared with their own benchmarks -- a small-cap growth-stock fund would, in this case, be measured against a small-cap growth-stock index -- it would be easier to measure the true outperformers in a given fund class.
Last year, 12 funds could boast eight-year streaks -- the longest current active length, going back to 1999 --beating their benchmark indexes; six large-blend funds, five large-growth funds, and one small-growth fund. This year, eight of those 12 funds were ahead of their comparable indexes for the year as of Nov. 30, putting them on track for nine consecutive years of outperformance.
Here's a sneak peek at which funds look likely to retain their membership in this exclusive club, thanks to Morningstar's Mark Komissarouk, who came up with these results as of Nov. 30 using Morningstar data. Of course, there could be changes before the end of the year, particularly given the high volatility of the past few months.
In the large blend category, five funds are still going strong. Two,
(RELEX Quote)Russell LifePoints Equity Growth Strategy and
(PRSGX Quote)T. Rowe Price Spectrum Growth, are funds that invest in other mutual funds.
Three others that invest directly in stocks --
(ANCFX Quote)American Funds Fundamental Investors,
(HIACX Quote)Hartford Capital Appreciation HLS and
(PHGAX Quote)Target Growth Allocation -- also seem, at least for now, to be in position to keep their streaks alive.
Fundamental Investors' top holdings include
Suncor Energy (SU Quote) and
Microsoft (MSFT Quote); Hartford Capital Appreciation's include
Google(GOOG Quote) and
Companhia Vale Do Rio Doce(RIO Quote) ; Target Growth Allocation's include
AT&T(T Quote) and
Cisco(CSCO Quote).
However, it looks as though
(CAMOX Quote)Cambiar Opportunity will finish under the Russell 1000 benchmark this year.
The large growth category gets a little interesting. Only two funds from the five remaining are in position to stay up:
(AMAGX Quote)Amana Growth, a fund that complies with the Islamic principles of Sharia; and
(ANEFX Quote)American Funds New Economy.
Amana Growth's top holdings include
Apple (AAPL Quote) and
Potash(POT Quote); New Economy's include Google and
Schlumberger(SLB Quote).
Three funds from that group --
(AGTHX Quote)American Funds Growth Fund of America (a huge fund with more than $200 billion in assets),
(FDCAX Quote)Fidelity Capital Appreciation and
(VMRGX Quote)Vanguard Morgan Growth -- look to be finishing under the Russell 1000 Growth index this year.
But there's a surprise in the category, too:
(NEFSX Quote)Natixis U.S. Diversified shows up -- but it wasn't there last year.
How did that happen? The fund's investment portfolio changed enough that Morningstar reclassified the fund from "mid-cap growth" to "large-cap growth." It hadn't had the streak beating the Russell Midcap Growth index, but had beaten the Russell 1000 Growth metric.
Natixis U.S. Diversified's top holdings include
Intel (INTC Quote) and
McDonalds'(MCD Quote).
Rounding out the list,
(TMCGX Quote)Turner Emerging Growth is still hanging in there. The lone non-large-cap fund with a benchmark-beating streak going back to 1999, it actually fits into the small growth category.
The fund's top holdings include
Decker Outdoor (DECK Quote) and
Oceaneering International (OII Quote)
No value-oriented funds show up on the streaks list until it gets down to a mere three-year streak, which itself is owned by only one value fund:
(EVTMX Quote)Eaton Vance Dividend Builder. That large-cap value fund has beaten the Russell 1000 Value index since 2004.
Dividend Builder's top holdings include
AT&T (T Quote) and
Constellation Energy.
(CEG Quote).
