Growth in a Safe Harbor

Standard & Poor’s Fund Services analysts, using three- and five-year rolling periods over 10 years through January 31, 2001, found that equity-income funds have a 99% correlation with large-cap value funds. The performance pattern of equity-income funds is almost identical to that of large-cap value funds. But they are somewhat more stable than large-cap value funds due to the limited volatility of their returns and relatively minimal dispersion around their median returns. While equity-income funds, on average, did not outperform large-cap value funds over any period, the downside of equity-income funds is significantly less than for any style category within the large-cap classification.

Upon examination of the large-cap styles for the 13-month period from the time of the market correction in March 2000 to April 30, 2001, S&P’s analysts found further substantiation of the downside protection provided by equity-income funds. The maximum loss over this period for the average equity-income fund was 9.79%, slightly better than the maximum loss for the average large-cap value fund at 10.03%. For the average growth fund, the maximum loss was 36.88%, while the average blend fund had a maximum loss of 23.59%.