July 14, 2005

Mid- and Small-Cap Funds Continue to Underperform Indices in First Half 2005

Actively managed mid- and small-cap mutual funds continued to lag their relative Standard & Poor's benchmarks during the first half of 2005, while large-cap portfolios finished slightly ahead of them, according to data from Standard & Poor's Indices Versus Active Funds (SPIVA) Scorecard.

The SPIVA data showed that 52.5% of large-cap funds beat the S&P 500 Index in the first half of the year. By contrast, the S&P MidCap 400 Index outperformed 80.4% of mid-cap funds, which means that only about 19.6% of mid-cap portfolios beat their bogeys. Also, the S&P SmallCap 600 Index outpaced 73.1% of small-cap funds during the half.

"Energy, utilities and real estate issues led the market in the first half of 2005," says Rosanne Pane, mutual fund strategist at Standard & Poor's. "Large-cap funds benefited from their overweight in those segments relative to the S&P 500. Cash holdings also helped large-cap active fund managers edge ahead of the S&P 500, which lost -0.81% through the end of June."

The SPIVA report found longer-term results continue to display the supremacy of indices over actively-managed funds. Over the past three years, the S&P 500 has outperformed 74.5% of large-cap funds, the S&P MidCap 400 has beaten 79.1% of mid-cap funds, and the S&P SmallCap 600 did better than 76.8% of small-cap funds.

Over the past five years, the S&P 500 has outperformed 61.8% of large-cap funds, the S&P MidCap 400 outpaced 80.8% of mid-cap funds, and the S&P SmallCap 600 beat 72.7% of small-cap funds.

With regard to index funds, the SPIVA report found that over the last three and five years, asset-weighted returns were slightly higher than equal-weighted returns, based on S&P 500, S&P MidCap 400 and S&P SmallCap 600 indices.

"The difference in returns among equal- and asset-weighted averages suggests that, among index funds, funds with bigger assets have performed better," says Srikant Dash, index strategist at Standard & Poor's. "Larger funds have smaller expense ratios and greater efficiencies of scale, which explains the difference in returns."

The complete second quarter 2005 SPIVA scorecard is available at .

Percentage of Active Funds Outperformed by Relative Benchmark*

Fund Category Comparison Index

2nd Quarter 2005

First Half 2005

One-Year

Three-Year

Five-Year

All Domestic Funds S&P SuperComposite 1500

37.7

49.2

50.2

60.2

59.4

All Large-Cap Funds S&P 500

41.3

47.5

55.2

74.5

61.8

All Mid-Cap Funds S&P MidCap 400

79.0

80.4

73.8

79.1

80.8

All Small-Cap Funds S&P SmallCap 600

63.0

73.1

77.4

76.8

72.7

Large-Cap Growth Funds S&P/BARRA 500 Growth

11.2

49.3

37.7

67.4

62.5

Large-Cap Blend Funds S&P 500

41.6

49.2

54.7

75.3

64.4

Large-Cap Value Funds S&P/BARRA Value

84.3

45.1

69.1

80.6

55.5

Mid-Cap Growth Funds S&P/BARRA MidCap 400 Growth

66.2

88.0

81.0

71.2

87.7

Mid-Cap Blend Funds S&P MidCap 400

71.2

70.7

67.3

69.8

79.2

Mid-Cap Value Funds S&P/BARRA MidCap 400 Value

91.5

75.4

73.0

83.7

91.4

Small-Cap Growth Funds S&P/BARRA 600 SmallCap Growth

49.2

83.0

90.7

95.5

91.3

Small-Cap Blend Funds S&P SmallCap 600

66.4

71.3

73.5

79.1

79.2

Small-Cap Value Funds S&P/BARRA 600 SmallCap Value

74.5

60.9

68.3

42.8

60.1

All-Cap Growth Funds S&P SuperComposite 1500

29.8

66.0

55.7

54.0

54.2

All-Cap Value Funds S&P SuperComposite 1500

51.5

32.8

22.8

34.4

9.1

Contact Bob Keane with questions or comments at: .

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