Now that scientists have successfully mapped the billions of DNA strands that constitute the human genome, maybe they'll take on the Internet. They can apply their considerable brainpower to the almost equally complex challenge of getting reliable and consistent information on international mutual funds online.
Sifting through the Internet's immense array of info about stocks and mutual funds may be the Information Age's equivalent to the recent DNA breakthrough by Drs. J. Craig Venter and Francis Collins. As any casual investor knows, the Web has become an incredibly powerful tool. Investors have access to a seemingly endless supply of data and statistics about performance, fundamentals, rankings and expense ratios. At one time, this information would have taken days to accumulate. Now it can be found in minutes.
Unfortunately, there are discrepancies and gaps in much of that data, especially when it comes to international funds. The problems can be with information provided by the fund companies themselves or from independent data companies.
I started noticing discrepancies while doing research for my columns. For example, reader
recently about the performance of some funds, including the
T. Rowe Price International New Asia fund . According to
, the fund is down 7.12% this year, while
, the other major mutual-fund data provider, lists it as down 7.10%. Morningstar lists the performance of the
Artisan International fund as up 5.23% this year, while Lipper lists it up 5.20%. Not huge gaps, obviously, but they make a difference, especially for individuals with considerable resources in a fund.
Then there are expense ratios and operating costs charged by the fund and subtracted from your overall returns. These are obviously important for readers to know. The
Deutsche Asset European Equity Fund
lists its expense ratio as 1.5% on its Web site, while
, which gets its data from Lipper, says it is 1.15%
Along with the discrepancies, sometimes key bits of information are missing.
, which gets data from Morningstar, does not even list the expense ratio for the Deutsche Asset Management European equity fund. The fund is an "investor class" fund that requires a $2,500 minimum investment. It's an affordable spinoff of a pricey institutional class fund that requires an investment of $250,000. The Deutsche Asset Management European equity fund was started in December and there is often a delay before Morningstar or Lipper receives performance information from the fund.
Those delays can be irritating, of course, and one of the most frustrating are returns that are not up to date. Independent Web sites as well as the fund companies themselves will sometimes list returns that are a few weeks or even months old. In fact, Deutsche Asset sells itself a bit short by listing the European Equity fund return as 80.62% as of May 31, while Morningstar says it is 87% as of June 26. One has to read the fine print carefully. In addition, investors frequently cannot obtain timely information on holdings, often because the funds themselves refuse to release up-to-date listings, a problem that does not only plague international mutual funds. (See
take on the subject.)
"You're generally going to find Lipper is more accurate on performance," says Jonas Ferris, co-founder of Maxfunds. "Since they make their money selling data, they have to be perfect." (
uses Lipper for its quoteserver.) Ferris finds Morningstar better for analysis and rankings but finds strengths and weaknesses in both. He says differences in returns can often be explained by using different start or end dates, or if the data company does not factor in when a fund pays a dividend. And sometimes a fund's expense ratios (which are reported by the fund company) can change but can be missed.
Ranking is one of the most frustrating areas of confusion. Both Morningstar and Lipper rank funds according to how well they are doing compared to similar funds. That's not as easy as it seems. A European mid-cap can make a few adjustments in its holdings and suddenly be a large-cap. On the other hand, funds can all be lumped together, so an Asian fund that invests heavily in tech companies is compared to one investing in Old Economy stocks.
In addition, some funds defy category. For example, the
Matthews Asian Technology fund
is the only fund that invests solely in Asian technology companies. It is down 15.83% this year. Morningstar places it in the "Specialty Technology" category, which is down 9.95% this year. That category includes funds such as the
Red Oak Technology Select fund, which has all of its holdings in domestic technology companies. But if the Matthews Asian Tech fund was in the "Diversified Asian/Pacific funds" category it would outperform that category's decline of 19.95%. Of course, it wouldn't fit there either, since it solely invests in one sector.
These kinds of discrepancies and gaps are maddening for all investors in mutual funds, but especially so for those wanting to invest internationally. (If you've had this kind of experience, please send me
an email.) Mutual funds are one of the best ways to invest overseas because you often have access to companies that don't list in the U.S. and whose stocks are virtually impossible for U.S. retail investors to buy, and because international fund managers usually have good knowledge of local market conditions.
For its part, Morningstar defends its information. "Investors who have questions should just send a question to our Web site," says Annette Larson, a spokeswoman at the firm. Lipper did not respond to a request for comment.
Investors need to tread carefully when trying to understanding international mutual funds -- at least until Venter and Collins take this on as their next project.
David Kurapka's Global Portfolio column appears Mondays, Wednesdays and Fridays on TSC. In keeping with TSC's editorial policy, he does not own shares in any companies or mutual funds mentioned in this column. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at