Just out today, Morningstar's Alex Bryan revisits the topic of persistence of MF performance. And what he finds is not so hot. Looking at performance relative to peers in 14 M* categories (3 FI), over several look-back and holding periods, he finds:
1 There is some evidence that relative fund performance persists in the short term. Among equity funds, this appears to be attributable to differences in exposure to momentum stocks, rather than differences in manager skill.
2 Over the long term, there is no meaningful relationship between past and future fund performance.
3 In most cases, the odds of picking a future long-term winner from the best-performing quintile in each category aren't materially different than selecting from the bottom quintile.
4 Survivorship rates are higher among previous winners than they are among previous losers. This difference increases with the length of the prior performance window and subsequent holding period.http://beta.morningstar.com/articles/735070/winning-funds-often-flame-out.htmlFor a more thorough assessment of his research design and findings, the full article can be downloaded from the Research Library on Morningstar's corporate website, here:
http://corporate1.morningstar.com/ResearchArticle.aspx?documentId=735103p.s. brace yourself--- the M* website has a distinctly NEW LOOK!
