Tags: Hulbert | study | mutual | funds

Study Makes Case for Newer Mutual Funds Over Older Ones

By    |   Monday, 24 February 2014 10:02 AM

Newer stock mutual funds appear to outperform older ones, a new study from three finance professors published by the National Bureau of Economic Research shows.

The authors of the study, Lubos Pastor of the University of Chicago and Robert Stambaugh and Lucian Taylor of the University of Pennsylvania, looked at more than 3,000 actively managed U.S. stock mutual funds between 1979 and 2011, comparing each fund with an appropriate benchmark.

The authors discovered that funds less than three years old beat their benchmarks by an average of about 0.9 percentage point more than did the funds at least 10 years old beat theirs.

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So why do younger funds perform better? "Mr. Pastor says . . . they are more likely to pursue the latest strategies, which have a better chance of beating the market," Wall Street Journal columnist Mark Hulbert writes.

"By contrast, the strategies that long-established funds began using many years ago may have lost their edge as they are adopted by a lot of other managers."

So when choosing between two funds you like equally, opt for the younger one, Pastor says.

Meanwhile, U.S. stock mutual funds saw a cash inflow of $11.2 billion in the week ended
Feb. 19, the largest in eight weeks, according to Thomson Reuters' Lipper.

"Investors are thinking that the worst stretch in the downturn of U.S. stocks is over," Tom Roseen, head of research at Lipper, told Reuters. The Standard & Poor's 500 Index has gained 5.7 percent from its Feb. 5 low.

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Newer stock mutual funds appear to outperform older ones, a new study from three finance professors published by the National Bureau of Economic Research shows.
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2014-02-24
Monday, 24 February 2014 10:02 AM
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