Merrill Lynch leads in U.S. stock funds

Mutual funds

December 07, 1997|By BLOOMBERG NEWS

NEW YORK -- With the year fast drawing to a close, Merrill Lynch & Co. leads the pack among the nation's leading managers of diversified U.S. stock mutual funds -- at least from a performance standpoint.

The loser was New York-based OppenheimerFunds Inc., according to the research firm Morningstar Inc., which analyzed the aggregate returns of diversified U.S. stock funds managed by the nation's 10 biggest fund groups.

Merrill's seven diversified U.S. stock funds rose an average 26.70 percent, exceeding the average 25.80 percent return of Vanguard's 23 diversified stock funds, which finished second in Morningstar's survey.

"It's the individual fund managers who deserve the credit," said Arthur Zeikel, president of Merrill Lynch Asset Management, which has almost $275 billion in assets. Oppenheimer also tends to use individual fund managers. This year, the managers of its diversified U.S. stock funds are having a tough time relative to the competition.

The average return of Oppenheimer's 13 U.S. diversified equity funds was 21.29 percent this year in the period ended Nov. 21, according to Morningstar. A diversified U.S. stock fund is defined by Morningstar as any fund that invests in a range of U.S. stocks from a range of industries.

To be sure, Merrill oversees the smallest number of diversified U.S. stock funds of the top 10. The high returns of a few Merrill funds would therefore tend to have a more substantial impact on its overall average than high returns of a few funds among companies with more entries.

The methodology used in the Morningstar survey is "flawed because you're comparing apples to oranges," said Robert Doll, director of equities investments at OppenheimerFunds.

"To compare a small cap growth fund this year -- for instance -- to all funds is an unfair comparison because the category did poorly this year," Doll said. "More of our funds invest in smaller companies than our competitors and this sector of the market hasn't done as well as the large-cap part of the market. Overall, we've had a slightly above average year relative to our competition."

Ten of Oppenheimer's 28 equity funds, including Capital Appreciation, Equity Income, Global and Developing Markets, ranked in the top quartile of their category this year, Doll said. By contrast, six funds, including the Discovery Fund and the Quest Officers Fund, were in the bottom quartile.

The four Merrill funds that are responsible for boosting the overall performance of the company's stock funds are Growth, Basic Value, Special Value and Fundamental Growth, according to Morningstar. The Merrill Lynch Growth Fund was the best performer of the bunch.

After Merrill, Vanguard and Fidelity Investments ranked as the top performers this year, Morningstar reported. Fidelity is the biggest U.S. fund company, followed by Vanguard.

Vanguard's performance has been led by funds that mimic the Standard & Poor's 500 Index, as well as actively managed funds such as Primecap and Windsor II.

"We tend do best from a performance standpoint when the market is led by the biggest companies, which it has the past few years," said John Bogle, Vanguard's founder.

Fidelity, the nation's biggest fund company, manages the highest number of U.S. diversified stock funds, 39 by Morningstar's count. The average return of these funds was DTC 25.07 percent as of Nov. 21. The top performers included the Fidelity Fund and the Fidelity Growth & Income Fund.

Like Oppenheimer, the performance of Baltimore-based T. Rowe Price's funds is lagging this year. The average return of T. Rowe Price's 17 U.S. diversified stock funds was 21.51 percent as of Nov. 21, according to Morningstar.

"We pursue a conservative-oriented growth strategy. It's an approach that's worked well over the years," said Steve Norwitz, vice president at T. Rowe Price. "Some years this investment style doesn't produce top quartile results. Over time, it has provided consistently above average results."

Furthermore, when one looks at absolute returns, "I doubt investors will complain," Norwitz said. "When you're providing 20 percent plus returns with below average risk, that's an attractive combination."

Fund companies' performance Average returns of U.S. diversified stock funds managed by the nation's 10 biggest fund groups for year-to-date as of Nov. 21, the past three years and the past five years, according to Morningstar. Firms are listed in descending order by assets managed.

...... ....... ..... Year-to-date ...... 3-year ...... 5-year

Fidelity Investments 25.07% ....... .....25.31% ..... .19.54%

Vanguard Group ..... 25.80% ....... .....27.72% .... ..19.67%

Capital Group ..... .24.94% ....... .....24.01% ...... 18.02%

Franklin Templeton ..23.17% ........ ....25.28% .... ..19.68%

Putnam Investments ..22.25% ....... .....25.59% ..... .20.10%

Merrill Lynch .......26.70% ...... ......24.38% .... ..18.30%

T. Rowe Price ..... .21.51% ...... ......27.08% ...... 19.90%

American Express ....21.72% ....... .....23.44% .......16.41%

Aim Management .... .24.21% ...... ......25.05% ... ...18.12%

OppenheimerFunds ... 21.29% ....... .....24.67% ... ...17.86%

Pub Date: 12/07/97

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