Best Mutual Fund Families

By Katy Marquardt

For mutual fund investors, there's no shortage of best mutual funds rankings floating around.

Often, these roundups highlight the best fund managers in a range of styles from different fund companies. That can be helpful for investors who cherry-pick funds from various fund families, but what about those who buy most (or all) of their funds under one roof, either for simplicity's sake or because their 401(k) offers a limited menu?

In a recent survey, more than 3,000 financial advisers weighed in with their picks of the top fund families.

Their criteria included consistency, ethics, trustworthiness, sophistication, and social consciousness. The highest-ranked mutual fund companies in the survey -- commissioned by Horsesmouth, an online adviser community and kasina, a financial services consulting firm -- were American Funds, iShares/Barclays, and Ivy Funds.

But since straight rankings reveal only so much, We asked a handful of financial advisers which fund families they favor and why.

Groupthink.

Much has been said about the team-management approach used by the American Funds, which houses many of the nation's largest mutual funds.

It works like this: Money invested in each fund gets divvied up into smaller portions and is managed independently by separate "portfolio counselors" with different investment styles and areas of expertise. One portion of the fund -- typically 25 to 30 percent -- is managed by a team of analysts. A principal investment officer and a committee oversee and monitor each fund.

Not all advisers like the committee approach, but Kay Lynn Mayhue, a financial planner with the Botsford Group in Atlanta, sees it as a major advantage.

"I like their team-management approach from a turnover standpoint. Consider if you owned a fund and the manager left -- the portfolio strategy may be lost," she says. It's worth noting, she adds, that no one fund family excels in every category. "There are asset classes where they're a little weak or don't have exposure, but overall, I call them [American Funds] the slow-and-steady horse."

Cutting-edge.

According to kasina, advisers viewed the iShares family of exchange-traded funds as "exceptionally innovative."

ETFs, which came on the investing scene in the early '90s and have exploded in popularity during the past few years, look like index mutual funds but trade on exchanges like stocks. And they're gaining quite a following among financial advisers because they are -- by design -- cheaper, more tax efficient, and less cumbersome than mutual funds.

Another plus: Unlike mutual funds, which execute orders at the end of the trading day, ETFs can be bought or sold at any point during the day. Mickey Cargile, managing partner of WNB Private Client Services in Midland, Texas, says he uses them in client portfolios because they're easy to buy and sell. "It's certainly the wave of the future . . . being able to trade all day long," he says.

Best in class.

Pacific Investment Management Co., called PIMCO, specializes in bond funds of all stripes. Although the world's largest bond manager is best known for its goliath PIMCO Total Return Fund, investors shouldn't overlook the firm's other offerings, says Ronald Rogé, CEO of R. W. Rogé & Co., a Bohemia, N.Y., wealth management firm.

"They've built themselves a think tank in terms of what's happening with the economy, recession, inflation, and interest rates," he says. "They've been good to us over the years in terms of managing the economy."

Among smaller fund families, Rogé is a fan of Milwaukee-based Artisan Funds, partly because it's run by veteran managers. A few of his favorites: Artisan International, Artisan Small Cap Value, Artisan Mid Cap, and Artisan Mid Cap Value.

Slow and steady.

In an age where "people are looking to protect what they have left," says Mayhue, predictability and security have become a top priority for investors -- especially those nearing retirement age. For that group, Rogé likes the T. Rowe Price family of funds.

"They have some funds that have held up pretty well over the past year or so, and they tend to be little more conservative with almost everything they do," he says. His favorites include the T. Rowe Price Capital Appreciation fund and the T. Rowe Price New Era fund, which he calls "the chicken's way of playing commodities."

Here are the top 10 fund brands, as rated by financial intermediaries in the Horsesmouth and kasina survey:

 

© U.S. News & World Report

 

 

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Best Mutual Fund Families: Which brands financial advisers favor and why