We thought we’d start continue up with the 130 U.S. equity funds which have passed their second anniversary but have not yet reached their third, which is when conventional trackers such as Morningstar and Lipper pick them up. As Charles has repeatedly demonstrated, the screener at MFO Premium allows you to answer odd and interesting questions. When markets are rising, everybody’s question is the same: who’s making the most?
There are two ways to answer that. One way is to look at total returns. As of Halloween (our data is current as of the end of last month), the clear winner is the $8 million Zevenbergen Genea (ZVGIX) fund, a focused fund with an emphasis on tech. (What’s a “genea”? Old Greek word related to “genealogy,” it sometimes signals “a generation,” which aligns with the fund’s emphasis on have a long-term view.)
Zevenbergen Genea Fund (ZVGIX)
Multi-Cap Growth with 23.6% annualized return since inception through October 2017
ProShares S&P 500 Ex-Health Care ETF (SPXV)
Large-Cap Core 18.1%
Leland Thomson Reuters Private Equity Index Fund (LDPIX)
Specialty Diversified Equity 17.9%
ProShares S&P 500 Ex-Energy ETF (SPXE)
Large-Cap Core 17.8%
Alambic Small Cap Value Plus Fund (ALAMX)
Small-Cap Value 17.8%
Sometimes a fund is good not because the fund is good, but because its investment style or focus is hot. For example, a hot energy market makes even bad energy fund managers look like geniuses. You’ll notice that two of the six top performers are distinguished for what they did not invest in: “ex Health Care” and “ex Energy” tells you that these funds are winning just because the excluded sectors are, for now, losing.
To control for that, we can look for funds that are distinctively better than their peers. Seven funds are beating their peers by more than 5% per year so far, with 50% of those being passive.
Leland Thomson Reuters Private Equity Index Fund (LDPIX)
Specialty Diversified Equity
17.9% APR since inception
13% annual lead over their (in this case, irrelevant) peer group
Zevenbergen Genea Fund (ZVGIX)
Multi-Cap Growth
23.6% APR
10.7% annual lead of their peers
ProShares Russell 2000 Dividend Growers ETF (SMDV)
Small-Cap Core
15.5% APR
7.2% lead
HCM Dividend Sector Plus Fund (HCMZX)
Equity Income
14.9% APR
7% lead
ProShares S&P MidCap 400 Dividend Aristocrats ETF (REGL)
Mid-Cap Core
13% APR
6.1% lead
VictoryShares US Small Cap High Div Volatility Wtd Index ETF (CSB)
Small-Cap Growth
13.8% APR
5.8% lead
Invesco PowerShares S&P 500 ex-Rate Sensitive Low Volatility Portfolio (XRLV)
Multi-Cap Core
13.4% APR
5.2% lead
Only two of the six funds with the highest total returns are also substantially leading their peers. Half of the peer beaters consciously factor dividends, which sometimes signals the quality of a firm’s management, into their strategies.
Bottom line: it’s not important to know that a fund is winning. It’s important to know why a fund is winning. That’s hard to suss out, but relative performance and some idea of portfolio biases gives you a place to start.
Off to Dallas for a professional conference. Pray for me!
