Every mutual fund prospectus notes that past performance doesn’t guarantee future returns. But too often, that’s the first thing prospective investors look at.
Especially with actively managed funds, it’s easy to believe that the stars of the past will deliver in the future.
S&P is out with its latest Persistence Scorecard that takes a look at how well mutual funds maintain rankings in the mutual fund universe. For the most part, those high fees don’t bring consistency.
- Only 5.23% of large-cap funds, 5.46% of mid-cap funds and 5.14% of small-cap funds stay in the top half over five years.
- Just 0.62% of large-cap funds, 1.09% of mid-cap funds and no small-cap funds managed to stay in the top quartile over the same period.
Here’s a chart capturing those performance figures over 5 years:
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