Last week Barron’s published their annual fund family rankings. As they typically do, Barron’s focuses first and mostly on one-year results, noting that most of this year’s winners “rose from the very bottom of the 2011 list”.
Did they ever. Only one of the top 10 firms from last year remained in the top 10 this year. Putnam finished first a year after placing 57th.
Putnam touted their #1 ranking in Barron’s on their Web site.
The Barron’s list gets a lot of attention and the winners tend to use the results as promotional fuel. But as I digested the results, I started to wonder if the Barron’s rankings do more harm than good for fund families.
The volatility of the list is one damaging aspect. Besides the short-term shuffling, this year saw 2011’s 10-year winner drop all the way to 15th in this year’s 10-year rankings.
I think it’s entirely plausible that these results can lead people to question if it’s possible for managers to have a sustainable advantage. At a time when actively-managed equity products in particular have hemorrhaged money, painting a picture of randomness is far from favorable.
The other problematic aspect of the rankings is the overwhelming emphasis placed on one-year results. Managers almost universally preach long-term thinking – that it is market cycles that matter, not days or weeks or months.
Yet, when given a chance to focus on positive one-year results, many of the firms embrace that opportunity to the fullest. Most of the top 10 have done something to trumpet the Barron’s list, something that I see as counter to a central tenet of their overall marketing and brand.
I’m not saying that firms shouldn’t be proud of good performance. But I think that to a certain degree it should be promoted in the consistent wrapper of long-term thinking and results.
