The following has been excerpted:
Barron’s has conducted its annual survey of fund families for more than 20 years, focusing on one-year relative performance for its main ranking. The list reflects each firm’s active-management ability.
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How We Rank the Fund Families
All mutual and exchange-traded funds are required to report their returns (to regulators as well as in advertising and marketing material) after fees are deducted, to better reflect what investors would actually experience. But our aim is to measure manager skill, independent of expenses beyond annual management fees. That’s why we calculate returns before any 12b-1 fees are deducted. Similarly, fund loads, or sales charges, aren’t included in our calculation of returns.
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Each fund’s performance is measured against all of the other funds in its LSEG Lipper category, with a percentile ranking of 100 being the highest and one the lowest. This result is then weighted by asset size, relative to the fund family’s other assets in its general classification. If a family’s biggest funds do well, that boosts its overall ranking; poor performance in its biggest funds hurts a firm’s ranking.
To be included in the ranking, a firm must have at least three funds in the general equity category, one world equity, one mixed equity (such as a balanced or target-date fund), two taxable bond funds, and one national tax-exempt bond fund.
Single-sector and country equity funds are factored into the rankings as general equity. We exclude all passive index funds, including pure index, enhanced index, and index-based, but include actively managed ETFs and smart-beta ETFs, which are passively managed but created from active strategies.
Finally, the score is multiplied by the weighting of its general classification, as determined by the entire Lipper universe of funds. The category weightings for the one-year results in 2023 were general equity, 37.7%; mixed asset, 22%; world equity, 16.1%; taxable bond, 20.1%; and tax-exempt bond, 4%.
The category weightings for the five-year results were general equity, 37.3%; mixed asset, 22.7%; world equity, 15.9%; taxable bond, 20%; and tax-exempt bond, 4.1%. For the 10-year list, they were general equity, 38.5%; mixed asset, 22.5%; world equity, 15.8%; taxable bond, 19.1%; and tax-exempt bond, 4%. Due to rounding, the percentages might not add up to 100%.
