It was 17 years ago that the (LMVTX) - Get ClearBridge Value C Report Legg Mason Value Trust (LMVTX), with legendary fund manager Bill Miller at the helm, took the first steps in a journey that would produce 15 consecutive years of annual performance numbers of greater magnitude than those of the S&P 500 total-return index.
It made the financial headlines in early 2001, when Miller had bested the S&P for the 10th consecutive year. Now with so many more funds in existence than there were in early 1991, you might expect there would be more that had reached this milestone.
With one highly debatable exception that we will discuss shortly, it won't happen before the final bell of 2008.
A search of TheStreet.com Ratings' database produced 36 open-end equity and hybrid funds that have now outperformed the S&P total-return gauge for each of the past nine years. These included periods during the 2000-02 bear market when many of the funds lost money, albeit less than the S&P.
In keeping with recent investment fashions, it is not surprising that the list is dominated by 15 funds that focus on non-U.S. equities. Nor should it be surprising that eight global equity funds -- meaning those that invest in international as well as U.S. stocks -- also appear on the list.
Equally predictable, considering the relentless upward march in the price of crude oil, is the appearance of five energy/natural resources funds on the list.
The fund that arguably came closest to achieving a decade of S&P-topping years is
American Funds New Perspective A (ANWPX). Its respectable 28.46% return in calendar year 1998 fell just shy of the S&P's total return by a razor-thin 11 basis points, or 0.11 percentage point.
Then, over the next nine years through the end of 2007, ANWPX outperformed the S&P by reasonably comfortable margins.
New Perspective's largest holdings are
and Roche Holdings.
But over the years, American Funds introduced additional classes of its New Perspective fund. These included the
American Funds New Perspective R5 (RNPFX) class, which debuted in May 2002. The class is targeted for large retirement plans and therefore has an extremely slim expense ratio.
The performance of this share class was backdated for a number of years prior to its initial offering date, using the results from the older "A" class, but with the R2 class' slimmer expense ratio applied.
Known as "prepended performance" in the fund industry, this backdating of results is approved by regulatory bodies -- with close supervision -- because it provides additional historical perspective to investors.
Thanks to its ultralow expense ration, the prepended performance of RNPFX for calendar 1998 is 24 basis points better than the total-return S&P's 28.57%. The R5 class's performance for every subsequent calendar year, like that of its "A" shares sibling, was comfortably better than the S&P.
So counting its prepended performance, the American Funds New Perspective R5 fund has outperformed the S&P total-return index for 10 consecutive calendar years.
The size of the asterisk that should be attached to the record of RNPFX's achievement is a matter of debate.
Richard Widows is a financial analyst for TheStreet.com Ratings. Prior to joining TheStreet.com, Widows was senior product manager for quantitative analytics at Thomson Financial. After receiving an M.B.A. from Santa Clara University in California, his career included development of investment information systems at data firms, including the Lipper division of Reuters. His international experience includes assignments in the U.K. and East Asia.