Lipper Research Analyst Robin Thurston on "Business for Breakfast" 1060 KRCN

Tuesday, May 10, 2005

A. We sure do. Every year at one of the large industry conferences we dosome special research and this year we've looked at how well Fund Familiesdo across all Lipper Leader measures as of 03/31/2005.

Q. Robin, can you remind us what Lipper Leaders are and how Lipper ratesfunds.

A. Sure. Lipper created Lipper Leaders ratings to focus not on theconcept of a best fund but rather what is the most appropriate fund for agiven investor. Lipper fundamentally believes that suitability is key tofinding the right fund for your portfolio. Lipper Leaders are calculatedin five distinct categories, Total Return, Consistent Return (or riskadjusted return), Preservation (downside risk), Tax Efficiency, andExpense. Each rating is scored relative to peer group and given a rankingfrom Lipper Leader (best) to 5 (worst).

Q. What do you mean by suitability?

A. Most investors have very different goals for investing which result indifferent needs or expect results. Someone 30 years from retirement mightfocus just on more aggressive classifications (like Small-Cap or Large-CapGrowth funds) and identifying a Lipper Leader on Total Return or ConsistentReturn within one of those classifications. Another investor 5 years untilretirement might be focused on more conservative classifications (likeGeneral Bond or Equity Income funds) and identify a Lipper Leader onPreservation and Expenses within one of those classifications.

Q. So tell us what Lipper found when looking at Fund Families and how theydid based on Lipper Leaders across the firm.

A. We started by looking across all funds with 3 years of history withinthe largest 20 fund families to see just how well they did on LipperLeaders. If a single fund fell into one or more Lipper Leader rating thenwe added this to the fund family score. So if a fund family had 5 fundsand all funds fell in at least one Lipper Leader rating then their scorewould be 5 out of 5 or 100%.

Q. So how well did the top 20 fund families do?

A. Well Vanguard was tops with a score of 99% with 157 of 159 fundsscoring as a Lipper Leader in one of the five rating categories. Thismight not be a surprise, because 99% of their funds were Lipper Leaders forExpense. As you begin breaking down the information into the variousLipper Leader rating categories you start to get a good feel for how wellsome firms do in areas like preserving capital or providing consistentlystrong returns. Charles Schwab finished second best among the top 20 firmswith 92% of their funds, or 44 out of 48 funds scoring Lipper Leader in oneof the five rating categories. But it should be noted that theirdistribution was much different than someone like Vanguard. Schwab had 44%of all their funds rated as Lipper Leaders for Preservation and 40% of alltheir funds rated as Lipper Leaders for Consistent Return.Several firms stand out with more than 30% of their funds rated LipperLeaders for Total Return; they include Vanguard, Schwab, T Rowe, FranklinTempleton, American Funds, and Allianz.

Q. Were there any Fund Families that scored 100%?

A. When we did the analysis across all firms we found one firm that scored100% but was also remarkably high in all Lipper Leader rating categories.GMO located in Boston had 46 out of 46 funds fall in one of the LipperLeader rating categories but remarkably 54% of their funds were LipperLeaders for Total Return, 53% were Lipper Leaders for Consistent Return,47% of their funds were Lipper Leaders for Preservation and 78% were LipperLeaders for Expense. Truly exceptional when you look across the wholeuniverse of fund families.

Q. So Robin what about local firms -- how did they fare in this analysis?

A. Well Janus had 64% of their funds rated as a Lipper Leader in at leastone category, Westcore funds had 60%, but ICON and Marsico were the bigwinners at 71% and 100% respectively.

Q. So what should investors take away from this type of analysis thatmight help them meet their investment goals?

A. It is clear that some fund families are better at certain things andthat investors looking for Total Return versus Preservation of Capitalmight look to different fund families to help them achieve the bestresults. So make sure you check www.lipperleaders.com for more informationand check with your funds for their Lipper Leader rankings.

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Don Cassidy is a Senior Research Analyst at Lipper specializing in fund flows, exchange-traded funds, (ETFs), closed-end funds, equity fund performance, and author of Trading on Volume (McGraw-HIll).