Top funds that beat their benchmarks
July 18, 2018 3:34 PM
It’s easy for clients to think about investment gains in absolute terms, especially in an up market.
But advisors need to remind them, constantly if necessary, that it’s relative. Any mutual fund performance is most meaningful when compared against the broader market or some other yardstick. After all, if the fund selected for a client’s portfolio returns 20%, they should know if the category posted a 30% gain before they start bragging.
On the other hand, a fund that gains just 4% can offer potential value for investors if its benchmark lost 10%.
So in the name of relative investing, we collected the 20 funds that have outperformed their respective benchmarks by the widest margins over the past three years. The list, which averaged 10.9 percentage points of overperformance, is heavy on tech and small-cap funds.
Despite these outsized performances, however, some clients can be better served by simply buying broad-based ETFs, says Greg McBride, chief financial analyst at Bankrate.
“Instead of playing ‘pin the tail on the donkey’ by trying to pick the next hot sector, buy the whole market through index mutual funds or ETFs. You can buy the whole market cheaper than you can buy individual sectors, and you won’t have to worry about picking the wrong one,” he says.
Scroll through to see the 20 funds with the highest outperformance over and above their benchmarks. Funds with investment minimums higher than $100,000 were excluded, as were leveraged and institutional funds. We also show three-year returns, assets and, as usual, expense ratios for each fund. All data from Morningstar Direct.
But advisors need to remind them, constantly if necessary, that it’s relative. Any mutual fund performance is most meaningful when compared against the broader market or some other yardstick. After all, if the fund selected for a client’s portfolio returns 20%, they should know if the category posted a 30% gain before they start bragging.
On the other hand, a fund that gains just 4% can offer potential value for investors if its benchmark lost 10%.
So in the name of relative investing, we collected the 20 funds that have outperformed their respective benchmarks by the widest margins over the past three years. The list, which averaged 10.9 percentage points of overperformance, is heavy on tech and small-cap funds.
Despite these outsized performances, however, some clients can be better served by simply buying broad-based ETFs, says Greg McBride, chief financial analyst at Bankrate.
“Instead of playing ‘pin the tail on the donkey’ by trying to pick the next hot sector, buy the whole market through index mutual funds or ETFs. You can buy the whole market cheaper than you can buy individual sectors, and you won’t have to worry about picking the wrong one,” he says.
Scroll through to see the 20 funds with the highest outperformance over and above their benchmarks. Funds with investment minimums higher than $100,000 were excluded, as were leveraged and institutional funds. We also show three-year returns, assets and, as usual, expense ratios for each fund. All data from Morningstar Direct.
20. Emerald Banking and Finance A (HSSAX)
3-Yr. Return: 16.51%
3-Yr. Return Over Benchmark (% points): 7.25
Expense Ratio: 1.43%
Total Assets (millions): $594.68
Front Load: 4.75%
3-Yr. Return Over Benchmark (% points): 7.25
Expense Ratio: 1.43%
Total Assets (millions): $594.68
Front Load: 4.75%
19. T. Rowe Price Global Stock (PRGSX)
3-Yr. Return: 15.22%
3-Yr. Return Over Benchmark (% points): 7.29
Expense Ratio: 0.84%
Total Assets (millions): $1,220.90
3-Yr. Return Over Benchmark (% points): 7.29
Expense Ratio: 0.84%
Total Assets (millions): $1,220.90
18. Alger Small Cap Focus I (AOFIX)
3-Yr. Return: 18.03%
3-Yr. Return Over Benchmark (% points): 7.47%
Expense Ratio: 1.20%
Total Assets (millions): $1,544.43
3-Yr. Return Over Benchmark (% points): 7.47%
Expense Ratio: 1.20%
Total Assets (millions): $1,544.43
17. Brown Capital Mgmt Small Co Inv (BCSIX)
3-Yr. Return: 18.63%
3-Yr. Return Over Benchmark (% points): 7.71
Expense Ratio: 1.29%
Total Assets (millions): $5,289.44
3-Yr. Return Over Benchmark (% points): 7.71
Expense Ratio: 1.29%
Total Assets (millions): $5,289.44
16. Conestoga Small Cap Investors (CCASX)
3-Yr. Return: 17.89%
3-Yr. Return Over Benchmark (% points): 7.74
Expense Ratio: 1.10%
Total Assets (millions): $2,354.72
3-Yr. Return Over Benchmark (% points): 7.74
Expense Ratio: 1.10%
Total Assets (millions): $2,354.72
15. Oppenheimer International Small-Mid Co A (OSMAX)
3-Yr. Return: 14.29%
3-Yr. Return Over Benchmark (% points): 7.76
Expense Ratio: 1.41%
Total Assets (millions): $11,050.34
Front Load: 5.75%
3-Yr. Return Over Benchmark (% points): 7.76
Expense Ratio: 1.41%
Total Assets (millions): $11,050.34
Front Load: 5.75%
14. Fidelity Select Retailing (FSRPX)
3-Yr. Return: 19.54%
3-Yr. Return Over Benchmark (% points): 8.54
Expense Ratio: 0.78%
Total Assets (millions): $2,828.15
3-Yr. Return Over Benchmark (% points): 8.54
Expense Ratio: 0.78%
Total Assets (millions): $2,828.15
13. Virtus KAR Small-Cap Core I (PKSFX)
3-Yr. Return: 19.96%
3-Yr. Return Over Benchmark (% points): 8.90
Expense Ratio: 1.07%
Total Assets (millions): $1,514.98
3-Yr. Return Over Benchmark (% points): 8.90
Expense Ratio: 1.07%
Total Assets (millions): $1,514.98
12. T. Rowe Price Science & Tech (PRSCX)
3-Yr. Return: 21.71%
3-Yr. Return Over Benchmark (% points): 9.23
Expense Ratio: 0.80%
Total Assets (millions): $6,249.80
3-Yr. Return Over Benchmark (% points): 9.23
Expense Ratio: 0.80%
Total Assets (millions): $6,249.80
11. Fidelity Select Semiconductors (FSELX)
3-Yr. Return: 24.32%
3-Yr. Return Over Benchmark (% points): 9.50
Expense Ratio: 0.75%
Total Assets (millions): $3,593.38
3-Yr. Return Over Benchmark (% points): 9.50
Expense Ratio: 0.75%
Total Assets (millions): $3,593.38
10. Fidelity Select Technology (FSPTX)
3-Yr. Return: 23.13%
3-Yr. Return Over Benchmark (% points): 10.45
Expense Ratio: 0.75%
Total Assets (millions): $6,262.85
3-Yr. Return Over Benchmark (% points): 10.45
Expense Ratio: 0.75%
Total Assets (millions): $6,262.85
9. Fidelity Advisor Technology I (FATIX)
3-Yr. Return: 23.36%
3-Yr. Return Over Benchmark (% points): 10.69
Expense Ratio: 0.77%
Total Assets (millions): $2,150.92
3-Yr. Return Over Benchmark (% points): 10.69
Expense Ratio: 0.77%
Total Assets (millions): $2,150.92
8. AlphaCentric Income Opportunities I (IOFIX)
3-Yr. Return: 10.53%
3-Yr. Return Over Benchmark (% points): 10.89
Expense Ratio: 1.50%
Total Assets (millions): $2,230.39
3-Yr. Return Over Benchmark (% points): 10.89
Expense Ratio: 1.50%
Total Assets (millions): $2,230.39
7. MFS Technology A (MTCAX)
3-Yr. Return: 23.49%
3-Yr. Return Over Benchmark (% points): 10.91
Expense Ratio: 1.24%
Total Assets (millions): $1,181.74
Front Load: 5.75%
3-Yr. Return Over Benchmark (% points): 10.91
Expense Ratio: 1.24%
Total Assets (millions): $1,181.74
Front Load: 5.75%
6. Janus Henderson Global Technology T (JAGTX)
3-Yr. Return: 23.76%
3-Yr. Return Over Benchmark (% points): 10.97
Expense Ratio: 0.93%
Total Assets (millions): $2,901.04
3-Yr. Return Over Benchmark (% points): 10.97
Expense Ratio: 0.93%
Total Assets (millions): $2,901.04
5. Fidelity Select Software & IT Svcs Port (FSCSX)
3-Yr. Return: 24.02%
3-Yr. Return Over Benchmark (% points): 11.64
Expense Ratio: 0.73%
Total Assets (millions): $6,097.64
3-Yr. Return Over Benchmark (% points): 11.64
Expense Ratio: 0.73%
Total Assets (millions): $6,097.64
4. Virtus KAR Small-Cap Growth I (PXSGX)
3-Yr. Return: 25.31%
3-Yr. Return Over Benchmark (% points): 14.94
Expense Ratio: 1.21%
Total Assets (millions): $4,491.46
3-Yr. Return Over Benchmark (% points): 14.94
Expense Ratio: 1.21%
Total Assets (millions): $4,491.46
3. Oppenheimer Global Opportunities A (OPGIX)
3-Yr. Return: 22.55%
3-Yr. Return Over Benchmark (% points): 15.42
Expense Ratio: 1.17%
Total Assets (millions): $9,154.15
Front Load: 5.75%
3-Yr. Return Over Benchmark (% points): 15.42
Expense Ratio: 1.17%
Total Assets (millions): $9,154.15
Front Load: 5.75%
2. ARK Innovation ETF (ARKK)
3-Yr. Return: 29.73%
3-Yr. Return Over Benchmark (% points): 17.73
Expense Ratio: 0.75%
Total Assets (millions): $1,182.92
3-Yr. Return Over Benchmark (% points): 17.73
Expense Ratio: 0.75%
Total Assets (millions): $1,182.92
1. ARK Web x.0 ETF (ARKW)
3-Yr. Return: 36.01%
3-Yr. Return Over Benchmark (% points): 23.75
Expense Ratio: 0.75%
Total Assets (millions): $690.75
3-Yr. Return Over Benchmark (% points): 23.75
Expense Ratio: 0.75%
Total Assets (millions): $690.75
