The SEC has very strict guidance on how mutual fund performance may be reported. When you go to sites such as Yahoo Finance, Google Finance and if you subscribe to Morningstar, you will always find the same reporting standards for monthly, quarterly and annual performance for mutual funds.
Unfortunately, it appears the “media” in personal finance has another Agenda, as we have written about with the New York Times, as in this Blog Post, “Hello New York Times, Please Define “Conventional Money Management”.
In an April 10, 2014 Bloomberg article: Mutual Fund Leaderboard: Who’s on Top in 2014? by Suzanne Wooley, Ben Steverman and Bloomberg Rankings, we analyzed one of their top picks for their large cap blend category.
We have asked Bloomberg for clarification on their methodology and sources, as shown to the left and have not heard back from them. We wanted to confirm we have not made an error.
Take a look at Not On My Nickel’s research methodology and you be the judge.
Bloomberg selected the Dreyfus Fund (DREVX) as their top performing large cap blend in its category for First Quarter 2014. Their methodology: “Bloomberg Rankings identified the top-performing fund in each category. Included were U.S. -domiclied retail mutual funds with a return above 7% in the first quarter and at least $250 million in assets”.
What should you look for in personal finance articles on mutual fund performance?
(1) Consistency in reporting standards for returns.
(2) Performance over several periods and never just highlights for a Fund manager’s quarterly returns that simply serves to encourage performance chasing.
(3) Always includes the overall fees and portfolio turnover for the fund, including references to the management style and the portfolio holdings.
Pictured to the right are the Total Returns for the Dreyfus Fund (DRVEX) as of 3/31/14, as reported by Morningstar. There appears to be a significant discrepancy from what Bloomberg reported for first quarter returns: 10.7% vs 1.23% for Quarter ending 3/31/14, as reported by Morningstar.
Bloomberg Has Done Excellent Work on Institutional Side
Quite frankly we are perplexed by this reporting and await Bloomberg’s explanation for what appears to be a significant misrepresentation. However, Bloomberg is not subject to SEC oversight and has more latitude than the fund companies in reporting performance. But, this still is not in the best interest of their retail retirement investors who read their reporting. It may harm their portfolios with improper return data being published, if selections are based on their inaccurate reporting.
Your Independent Research vs Bloomberg’s Leaderboard
You be the judge. Do you want biased information from conflicted media sources or unbiased research, tools and training to make an informed decision for your retirement nest egg. The chart below is for 6 months to give a touch longer time horizon. However, Not On My Nickel urges our subscribers to look at our Six Criteria (Under Save our Sanity) in selecting any portfolio manager. Only select a manager that has a minimum of five years SEC – filed audited performance.
One should also note the fees in the Bloomberg top large cap blend selection are higher than the Not On My Nickel ‘s researched large cap blend fund. The portfolio turnover is just 3.79% in the fund below and is over 72.91% in the Dreyfus Fund. Portfolio turnover is directly related to very high trading costs that take away from your returns—money out of your pocket.
We still have not heard from Bloomberg on their “return” methodology for their “Mutual Fund Leaderboard: Who is On Top in 2014?” It appears personal finance columns, in media that should be providing a service to retail retirement investors are providing a major disservice. The New York Times and now Bloomberg reflect the state of the retail retirement “advice” market- disingenuous, misrepresentative and very conflicted. Reader beware.
You Be the Judge – Why Did Bloomberg Represent, DREVX, as the Top in their Category-or is NOMN in Error?