What Vanguard's Got that Putnam and Janus Do Not
Some firms can do growth and value.
Fund Spy
Most sizable fund firms try to offer a widely diversified menu of domestic-stock fund choices. Does that mean investors can do one-stop shopping, confident that a given fund family will offer them solid choices that cover both value and growth stocks?
To at least partially answer this question, Morningstar research analyst Stephen Murphy and I developed a rather simple methodology, screening for families with a high rate of success on both the growth and value sides of the ledger. If 60% of a firm's funds didn't have above-average five-year returns in both areas (relative to their respective categories), we kicked them out. Shops with just one fund with a five-year return in either area were also excluded.
Some big shops did not make the cut. Lacking any value fund with a long-term record, Janus did not make the grade. Putnam's growth funds cleared our hurdle with ease, but its value offerings fell far short. American Century's value portfolios passed the test, but surprisingly, not one of its growth funds sports an above-average five-year return. And Fidelity fell a bit short on the growth side, though it merits an honorable mention.
Here are the winners:
Vanguard
There's a lot to be said for low costs. Many of Vanguard's better-performing funds are index offerings, including Growth Index (VIGRX). But the firm has also done a good job of hiring subadvisors to run its actively managed funds, so offerings such as U.S. Growth (VWUSX) and Growth & Income (VQNPX) also sport solid five-year returns.
American Funds
Financial advisors love this family, and it is easy to see why. A solid majority of its value and growth funds are consistently above-average performers, including Washington Mutual Investors (AWSHX) and Growth Fund of America (AGTHX). With low expenses too, this shop looks like a solid bet for fund investors.
SEI Funds
Betcha didn't guess you'd see this one on the list. SEI uses subadvisors from a number of shops, and it apparently does a pretty good job of picking them. From Large Cap Value (TRMVX) to Small Cap Growth (SSCGX), the firm's offerings sport above-average long-term returns.