MFWire/Academic Study: Does Morningstar "Stewardship" Predict Fund Performance?

ibartman

From MFWire.com
http://www.mfwire.com/article.asp?template=article&wireid=2&storyID=39728&bhcp=1

"Morningstar's new corporate culture ratings for mutual funds do not predict fund performance, according to a new study conducted by two finance professors at Pace University."

"Finance professors at Pace’s Lubin School of Business looked specifically at the ratings' ability to predicts risk-adjusted performance of domestic equity funds over the period 2005-2010."

“We find there is little significant evidence that corporate culture predicts better fund performance...Indeed, we find that no individual component of the Morningstar stewardship rating including board quality, fees, manager incentives and regulatory issues is able to consistently predict fund performance."

Ted

FYI: Here is the study.
Regards,
Ted
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=890128

ibartman

Ted: Thanks, but I think it's this one:

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1666301

"To do this we use Morningstar’s corporate culture grades for mutual funds and then examine the ability of these corporate culture grades to predict risk-adjusted performance of domestic equity funds over the period 2005-2010. "

bee

Rather than using a 5 star rating system I wish M* would adopt a simple 3 star approach based on the following fund performance over a 1 year time frame and adding bronze, silver, or gold to a 3 star fund that has performed "on average" in the top third of it's category for 3 years (bronze),5 years (silver),10 years (gold) time frame:
1 star = bottom 1/3 of category
2 stars = middle third of category
3 stars = top third of category

Here's a link to a list of mutual fund families that have consistently out performed their competitors:

The Street Ratings 2012 Ultra Fund Families:
http://www.thestreet.com/story/11395608/1/thestreet-ratings-2012-ultra-fund-families.html

In the "100 or more funds", T Rowe Price (122 funds) had 65% of their funds were in the top 1/3 of their peers.

In the "40-99 funds", Delaware Investments (94 funds) had 65% of their funds were in the top 1/3 of their peers.

In the "10-40 funds", Watsatch Funds (13 funds) had 92% of their funds were in the top 1/3 of their peers.

To me, Wasatch Funds really stands out as a fund family to follow more closely . I own WAEMX. They seem to add a lot of value in niches of the market (small cap emerging markets for example) that an individual might not be able to do on their own.