For Funds, Repeat Success Rare

As the Chicago Bears and the Indianapolis Colts line up on Sunday, think twice before betting on either returning next year. Teams in the previous five Super Bowls have gone a middling 81-79 combined the season after ranking as the elite among their peers.

The latest mutual fund performance persistence scorecard from Standard & Poor's suggests that repeated success was equally difficult for U.S. stock mutual funds over the same period.

S&P's scorecard is designed to address a common drawback of fund rankings: they tend to smooth over bad years. Because investors typically focus on annualized returns over a three- or five-year period, funds that have a single stellar year can look attractive for the next few years, even if their performance falls off sharply.

The persistence scorecard displays a fund's movement between quartiles and halves for five nonoverlapping time periods. It looks only at actively managed, diversified U.S. stock funds (not index funds or sector funds), and these funds are compared only against peers that invest in stocks of the same size -- small-cap, mid-cap or large-cap. The scorecard also evaluates other dynamics such as expenses and manager tenure.

Just 71, or 13.2%, of the large-cap stock funds analyzed in the latest report earned a top-half ranking for five straight 12-month periods ending Dec. 31, 2006. For mid-cap stock funds, the figure was 16, or 9.9%, and for small-cap stock funds it was 24, or 10%.