Ask Which Market Your Fund is Beating

In a recent Wall Street Journal article, columnist Jason Zweig highlights and questions the fee practices of a Putnam Investment mutual fund, noting that the interests of fund managers and investors can sometimes become “misaligned.” Zweig writes that the Putnam Capital Spectrum Fund, launched in 2009, touted “unusual objectives and fees”: It could buy any securities its manager (David Glancy, who has since left Putnam) found attractive and charged a “fulcrum” fee that matched downward… Read More

Morningstar’s Revamped Ratings Deliver Hit to Active Funds

The rating agency Morningstar has spruced up its rating system, which “hasn’t proved to be very predictive for future performance and volatility” and has “lost its luster because of the indexing craze.” This according to an article in Barron’s. The article reports that the revised system applies a zero-fee benchmark hurdle when analyzing funds which, while helpful to investors, will hurt managers. According to the firm’s head of global manager research Jeffrey Ptak, of the… Read More

A Tale of Two Small-Cap Indexes

A recent article in Barron’s compares the performance of two small-cap indexes: the Russell 2000, the most commonly-used benchmark, and the lesser-known S&P SmallCap 600 index. According to the article, over 90% of investment funds focus on the Russell 2000, but this index has underperformed its S&P peer for more than twenty years. “The difference isn’t trivial, either,” the article points out, adding that when reinvested dividends are taken into account, the difference amounts to… Read More