Skimming the Crème de la Crème
When BusinessWeek started its Mutual Fund Scoreboard in 1986, we put about 400 funds through the wringer -- and only 29 received our highest rating for superior risk-adjusted total return. Earlier this year, we applied that same tough standard to a far larger universe of funds and came up with 172 equity and 102 bond funds worthy of our A rating. But even if a would-be investor focused only on those that are top-rated, that's still lots to sift through.
That's why we turned to the Global Fund Research unit at Standard & Poor's, a sister unit of The McGraw-Hill Companies. Together, we tackled the task of winnowing down that list of hundreds of top-performing funds to a handful with truly superior managers. We did it -- and awarded the managers of 10 funds the first annual Standard & Poor's/BusinessWeek Excellence in Fund Management Award.
This is a fitting time to launch these awards. We base our ratings on five-year performance, and the past five years certainly have been extraordinary -- both on the upside and downside. Managers earning an award now have had to prove their mettle through especially turbulent times.
In choosing these premier managers, we kept you, our readers, in mind. We screened out funds that were closed to new investors and ruled out those with onerous expenses. To assure comparability, we also insisted that the lead managers have been on the job for all five years.
Such restrictions cut the list to 40. Then s&p analysts Phil Edwards, Gary Arne, and Rosanne Pane, went beyond what quantitative ratings can do: They pored over fund records, interviewed portfolio managers, and debated the merits of the candidates. By that rigorous process, we selected just 10.
Some managers will be familiar to BusinessWeek readers. Others have created top-notch funds in relative obscurity. Markets and Investment Editor Mara Der Hovanesian and Personal Finance Editor Lewis Braham profile the best of the best. You can log on to BusinessWeek Online for more on these funds, including interviews with their market-savvy managers.
By Stephen B. Shepard, Editor-in-Chief