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12 Shocking Mutual Fund Statistics

Enter the realm of the strange but true.

Russel Kinnel, 09/30/2010

Think you know everything about mutual funds? "Then I have something to tell you which may shock and discredit you." (Lionel Hutz, The Simpsons) ... Or at least make you say "hmmm."

1. Bruce Berkowitz at Fairholme FAIRX and Fairholme Focused Income FOCIX has 140 times more money invested in his funds than Harry Lange has in Fidelity Magellan FMAGX. We know this because Magellan's latest filing showed Lange with between $500,000 and $1 million in his fund. Meanwhile, the management company overseeing the funds has $148 million in his two funds. While it has two employees, Berkowitz had been the sole employee when the funds listed $139 million invested in them.

2. Fully 75% of the balanced funds with star ratings of 1 star in 2005 were wiped off the face of the earth in the ensuing five years. Now that's attrition. We found that 1-star funds were much more likely to be killed off than higher-rated funds. Why? Poor performance and resultant poor flows mean a fund isn't likely to be a money winner for the fund company. On the one hand, it's bad for fund investors that these records get swept under the rug. On the other, investors in bad funds are probably better off getting their money back or having their fund merged into another.

3. Large-growth funds have seen $113 billion in net outflows since 2001. This year is already the worst year for large-growth flows, with $29 billion in net outflows. Mind you, the category received $170 billion in net inflows in just 1999 and 2000 combined. Needless to say, it's been a brutal 10 years for large growth.

4. Money market funds are paying almost nothing but are getting inflows. The last time short-term rates approached zero, December 2008, money flew out of money markets. This time around, it's flying in. While the yields may be similar, there is one big difference. The other time, people were worried about big funds breaking the buck. This time around, there's no panic.

5. The best 15-year returns belong to a bond fund. GMO Emerging Country Debt III GMCDX has a 17.5% annualized 15-year return. No, that won't happen the next 15 years.PAGEBREAK

6. There were 650 funds with Growth in their names that actually shrunk over the past decade.

7. 54% of funds with the word Plus in their names have underperformed over the past five years.

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