The makers of the latest mutual fund rating tool want to base their info on more than just past performance. On Monday MutualDecision revealed an online system that aims to actually forecast performance, using statistical models. Currently, the site offers access to an "Active Share Model" and a "Return Gap Model" for ranking funds.
Company Press Release
ARLINGTON, Va.--(BUSINESS WIRE)--MUTUALdecision, a comprehensive and trusted online source for mutual fund information, today launched the nation’s first online tool for investors and financial advisors to forecast mutual fund performance based on leading academic models.
Traditionally, mutual funds ratings are based on past performance. The academic tools utilized by MUTUALdecision leverage the latest and most advanced mathematical and statistical techniques developed by leading professors to rate mutual funds. By making this powerful new online tool available, investors and financial advisors can, for the first time, determine how current U.S. equity mutual funds rate based on academic models.
The Return Gap Model and Active Share Model are now available on the MUTUALdecision Web site, and other leading academic models will be made available in the coming weeks:
1) Return Gap Model – analyzes the difference between a fund’s actual return and the return it would have earned by following a buy and hold strategy based on the fund’s most recently disclosed portfolio. Analyzing twenty years of historical mutual fund data, the Return Gap has been found to be a predictor of future fund performance. The top mutual funds in this study beat the market by 1.2% annually over 20 years.
2) Active Share Model – measures the extent to which a mutual fund’s portfolio holdings differ from the portfolio’s benchmark index – and if the fund outperforms its benchmark. Active management is achieved through stock selection, shifting assets across classes, and/or market timing. Funds with the highest Active Share outperformed their benchmarks on a risk-adjusted basis by 1.5% annually.
“Today’s challenging investment climate reinforces the need for online tools that better position mutual fund investors to make intelligent decisions with their money, while arming financial advisors with the critical data they need to recommend funds to their clients,” said George Comer, chief academic officer at MUTUALdecision and Associate Professor of Finance, Georgetown University. “By collaborating with leading mutual fund academics and leveraging their groundbreaking research, MUTUALdecision has developed a powerful yet easy-to-use predictive tool for investor’s to identify tomorrow’s best mutual funds today.”
The Return Gap model is based on a highly regarded research paper, Unobserved Actions of Mutual Funds, authored by Marcin Kacperczyk (University of British Columbia), Clemens Sialm (University of Texas at Austin), and Lu Zheng (University of California, Irvine). The Active Share model is based on the research paper, How Active is Your Fund Manager? A New Measure That Predicts Performance, authored by Martijn Cremers (Yale School of Management) and Antti Petajisto (Yale School of Management).
“Mutual funds represent the heart and soul of most personal investment portfolios, 401k plans and college funds; and yet investors and financial advisors are forced to navigate a tangled web of complex and often contradictory information online,” said William G. Byrnes, founder and chief executive officer at MUTUALdecision. “Launching these first two models reinforces MUTUALdecision’s mission to provide approximately 55 million U.S. mutual fund investors with a powerful new tool for rating mutual funds, as well the Web’s easiest-to-use source of mutual fund information.”
MUTUALdecision was founded in 2006 as an unbiased, one-stop Web site aggregating mutual fund news, mutual fund ratings, articles, academic research and tools for investors to identify top mutual funds and make intelligent mutual fund investment decisions. In addition to hosting leading academic models, the Web site offers:
Abstracts of leading academic articles
List of top mutual funds by category
Market, investment and mutual fund investment news
Morningstar mutual fund profiler with star rankings
Mutual fund screener
The Performance Gap and Active Share models will be available for free during a two week trial period, after which site visitors will be able to access all hosted academic models and site tools through a monthly ($9.95), quarterly ($23.85) or annual ($71.40) subscription.
About MUTUALdecision
Based in Arlington, Va., MUTUALdecision is an unbiased, one-stop Web site aggregating mutual fund news, articles, mutual fund ratings, academic research and tools for investors to make intelligent mutual fund investment decisions and easily identify top mutual funds. MUTUALdecision is the first to bring leading mutual fund academic research models directly to investors and financial advisors so that they can easily identify tomorrow’s best mutual funds. For additional information, please visit http://www.MUTUALdecision.com.
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