NEW YORK Winners of the 2013 U.S. Lipper Fund Awards finessed their way through volatile markets, delivering consistent returns, despite global turmoil.
The awards recognize 37 top-performing mutual funds for the past three years that managed their way through the euro zone debt crisis, monetary stimulus measures from the European Central Bank and the Federal Reserve, the U.S. Presidential elections along with political turmoil in Washington over tax and spending policies
This is the 11th year that Lipper, a unit of Thomson Reuters Corp, has conducted the awards. This year, the awards recognized 89 fund families and were officially presented in New York City on March 14.
In a conversation with Reuters, Tom Roseen, who is Lipper's head of research services in Denver, explains why the funds with the flashiest returns do not always take top honors.
Q: What is the most important factor for picking the winning funds or firms?
A: We base the selection of winners on who has the best risk-adjusted return. And our measure of risk-adjusted return is consistent return.
For that consistent-return measure, we give a rating of one to five, with five being the best. To identify the top-performing funds for the three-year period ending November 30, 2012, we find the best score in that top quintile and we designate that as the winner.
The reason why we think that's important is that we know investors really abhor downside performance. We all love upside performance, but we really detest downside performance.
Our risk-adjusted return measure punishes downside performance about four times more than it benefits or gives accolades for upside performance.
In addition to awarding trophies to funds with consistent performance for the past three years, we also recognize funds with exemplary five- and 10-year performance.
These awards are part of the Thomson Reuters Awards for Excellence, a global family of awards that celebrate exceptional performance throughout the professional investment community.
Q: Which trophy winners stood out to you this year?
A: The stand outs, I have to say, are the repeat winners: large-company firms that won for our equity grouping. One who won for large-company equity was PIMCO. They've won for four consecutive years in a row. That is quite a feat. PIMCO is not known for their equities and here they are winning for the fourth consecutive year.
To qualify to be a large fund family, a firm has to have at least five unique equity funds that are at least three years old. PIMCO has nine. The small number gives them a competitive edge.
PIMCO also has the advantage of using synthetic equities, or derivatives, which can be used to deliver the performance of the broader stock market. They have the ability to reap some of the interest and some of the yield from having a part of that portfolio in fixed-income securities.
Another repeat winner for the small company fund award is Delaware - they didn't happen to win consecutively, but they won in 2011 and 2013. That should tell people these folks are basically sticking to their knitting pretty well. They have a strong fixed-income discipline, but they also did well in the mixed asset groups and in the equity groups.
Q: Were there any winners that strike you as unique?
A: TIAA-CREF. We haven't necessarily seen them at the top of the charts before. It's the way they're perceived by the public. Everybody knows them, but they don't really know what they do, which is mainly manage money for academic professionals. The firm is recognized for its well-rounded returns in stocks, bonds and mixed assets.
Q: What else jumps out at you?
A: Some of the smaller funds that you haven't heard of in the past. And those are actually ones that I think a lot of people like keeping their eye on because they're small, they're nimble and a lot of times they're very niche-focused companies.
The Weitz Hickory Fund for instance, is a unique fund, very small probably as far as assets under management. But also small as far as crew goes, so you've probably got a pretty nimble fund that can move around pretty well.
Q: Do you award the funds you expect to stand out in the future?
A: We do hope there's some stickiness to it. We can't say right off the bat that there's stickiness in these measures, but I will say this: If we take a look at the list of repeats, you can see that it does identify funds that have consistent behavior.
A lot of times, these are not the funds that are at the top of their list for total return. We're not looking for the home run every time. We like to see one that is hitting doubles and triples.
Q: Who is the ideal investor in these funds?
A: It is a person that's looking for more persistent and consistent risk-adjusted returns. Some people say: 'Listen, I like the volatility, I want somebody who's very aggressive and I don't mind wild swings.' Well, then this isn't necessarily the award they want. Just about everybody who is looking for strong risk-adjusted return, that's what this measures for.
(Reporting by Sam Forgione. Editing by Lauren Young and Andre Grenon)