Top Six Mutual Funds Most-Favored by Financial Advisors
By Hal M. Bundrick
NEW YORK (MainStreet)--When choosing mutual funds for their clients, financial advisors are considering more than performance: investment style is a key consideration. And the fund family they are looking to deploy more often in the coming year is unavailable to the retail investor.
A recent survey of 1,700 U.S. financial advisors by Cogent Research scored 24 leading fund providers based on advisor intent to increase or decrease investments with those firms within the next 12 months. Ratings were determined by calculating the net intent to increase or redeem investments among users of each firm, then indexing the results along a continuum from +100 to -100. The average score across the field was +27, with results ranging from a low of 1 and a high of 45.
Dimensional Fund Advisor (DFA) funds led the pack of fund managers that advisors expect to utilize more in the coming year. An Austin, Texas based firm, DFA mutual funds are available only through advisors.
"While investment performance remains paramount, advisors are also placing greater importance on understanding, and recognizing, asset managers' unique investment processes or expertise in specific asset classes" the report states. "This shifting focus has resulted in a re-ordering of firms that are gaining momentum among advisors in the marketplace."
Rounding out the top six mutual fund providers preferred by financial advisors as compiled by the study are PIMCO, Vanguard, Franklin Templeton, Ivy Funds, and T. Rowe Price.
Investment philosophy trumps fund performance as the prime motivator to advisor loyalty, according to the research.
"Providers with the strongest investment momentum are successfully communicating their firm's distinctive investment philosophy," says Cogent Senior Director Meredith Rice. "Couple that with advisors becoming increasingly focused on portfolio diversification and risk management, and the stage is set for moving assets to managers that have something beyond a simple performance story to tell." Rice also notes that, overall, advisors anticipate significant increased use of non-U.S. equities, emerging markets, and alternatives over the next two years.
--Written by Hal M. Bundrick