Mutual Fund Outperformance Consistency Overrated – 12/31/10

Of 370 Mutual Funds that Outperformed Benchmark by 1% or More and Exhibited Less Risk than Benchmark Over 10 Year Period

Virtually all of the best investment managers, based on 10-year performance, experienced three-year stretches where they underperformed their benchmarks and peers.

In at least one of the 37 one-year holding periods, nearly all of the top-performing managers underperformed their benchmarks by three percentage points or more and fell below their peer group average.

Over the 10 years ended December 31, 2010, top-performing funds that were upgraded produced less excess return over the subsequent three years than those that were downgraded. Investors who abandoned these managers would have left significant wealth on the table.

It may pay for an investor to stay with a top-performing manager through times of poor relative performance. The manager’s likelihood of success increases over longer holding periods.

Investors should consider the investment objectives, risks, charges and expenses of a fund carefully before investing. This and other information is found in the prospectus. For a prospectus, contact your Baird Financial Advisor. Please read the prospectus carefully before investing. Past performance is no guarantee of future results.

Source: Morningtsr, Baird analysis

Click Here for Your Long Term Care Insurance Quotes