Standard & Poor’s released its latest scorecard measuring the consistency of top mutual fund performers over three and five consecutive years. The semiannual scorecard also measures performance persistence, corrected for survivorship bias.
As of December 31, 2005, only 15.5% of large-cap funds, 10.2% of mid-cap funds, and 9.8% of small-cap funds maintained a top-quartile ranking over three consecutive 12-month periods. The data on the scorecard also show that 32.2% of large-cap, 27.3% of mid-cap, and 25.7% of small-cap funds consistently maintained a top half ranking over the same time period.
“Very few funds manage to maintain a consistent top quartile ranking for long periods of time,” says Srikant Dash, Index Strategist at Standard & Poor’s. “Our study shows that over five consecutive years, only 1.9% of large-cap funds, 3.1% of small-cap funds, and no mid-cap funds have maintaineda top-quartile ranking.”
The scorecard also evaluates the characteristics of those few funds that persistently maintain a top half or top quartile ranking. Standard & Poor’s data show that consistent performers have longer manager tenure at their funds, lower expenses relative to their peers, and have managed to minimize or avoid losses during the bear market relative to their peers.