Award-Winning 'Small' Fund Not Small After All
Waddell & Reed Financial (WDR) - Get Report seems to have benefited from a quirk in the way Lipper ranks mutual funds.
Last Wednesday, Waddell & Reed Advisors Funds (WRA), a division of WRF, received the award for best overall small fund family at the 2008 U.S. Lipper Fund Awards held in New York.
The family of funds includes
Waddell & Reed Advisors Asset Strategy
(UNASX)
and
Waddell & Reed Advisors Accumulative
(UNACX)
.
Along with WRA's other funds, the organization had $24.7 billion under management as of Dec. 31, which put it under the $28 billion upper limit for a "small" fund family, according to Lipper.
But in another sense, WRA isn't a small fund family. Its sister fund group, Ivy Funds, which is owned by WRF, managed a further $24.3 billion, bringing the grand total to $49 billion as of year end, according to company spokesman Roger Hoadley. That's well beyond Lipper's small-family cap.
There's another thing: Ivy Funds won the Best Mixed Assets Fund Family award for the small fund family category.
Goldman Sachs
(GS) - Get Report
won the large family award for the same category.
Again, the Ivy Fund family's total assets under management tucked under the asset cap, but wouldn't have if the two organizations asset totals were combined.
Granted, the issue isn't simple.
The Plot Thickens
In some ways, the WRF corporate organization is integrated. The firm acknowledges that some fund managers do work for both Ivy and Waddell & Reed Advisors. But it also points out that some do not and instead work solely for one or the other.
However, WRF insists that its organization is split, especially when it comes to marketing.
"Waddell & Reed funds are distributed only through the Waddell & Reed financial advisers, while Ivy Funds are mostly distributed through third-party organizations," explains Thomas Butch, chief marketing officer for WRF.
He says that the marketing arms and strategy of each are totally separate.
But here's the question: How separate can these two fund families really be if their marketing operations are both headed by Butch, which WRF confirms is the case?
That's a factor that Lipper's Rossen says may make a difference next year; he admits that he wasn't aware the two marketing organizations were headed by the same individual.
"If we went back and started to look deeper, it could be possible we would re-evaluate in the future," he says.
Now that the award decisions are over for the year, the team at Lipper will examine what could have been done better and review decisions made, including the one for Waddell and Ivy, he says.
Whatever happens next year, it's worth wondering how WRA and Ivy Funds would have fared if they were more appropriately tucked into the "large" category. Would WRA, for instance, have beaten out the $900 billion Los Angeles-based money-management firm
American Funds
, which did, in fact, win the "large" category?
On the face of it, American would appear to be a clear winner: Fund watchdog Morningstar says American made compound annual returns of 14.2% over the last five years vs. 12.9% for WRA.
Of course, Lipper has its own methodology for ranking funds, which involves more than just a simple look at returns. Consistency of return is just as important, Lipper's Roseen says.
And Ivy would have had to beat out Goldman to win its category.
Other winners in the funds family categories included
Loomis Sayles
for best large equity fund family,
Brazos Capital Management
for best small equity fund family,
Thornburg Investment Management
for best large fixed income fund family and
Nationwide Funds Group
for best small fixed-income fund family.








