by Tom Taulli | July 19, 2012 9:20 am
Mega mutual funds — those with tens of billions in assets — often get a bad rap. The belief is that they have little flexibility and usually lag the indexes.
Yet some funds are somehow able to get standout returns, on a consistent basis. If anything, their scale can provide lots of stability, which is certainly attractive in the current volatile environment.
Besides, mega-funds usually have top-notch portfolio managers and analysts. Their size can provide the resources to cost-effectively pay for talent.
So what are some of the giant mutual funds worth considering? Here are five:
2012 Return: 12.4%
Assets: $28.6 Billion
Investing in growth companies can be risky. Even seemingly no-brainer companies like Zynga (NASDAQ:ZNGA) and Facebook (NASDAQ:FB) have been big-time losers.
But the T. Rowe Price Growth Stock (MUTF:PRGFX) fund has been able to find success in a tough market. Portfolio manager Rob Bartolo has been disciplined in finding companies that have a proven track record of earnings and cash flow growth. As should be no surprise, the top holding is Apple (NASDAQ:AAPL). But among the others are Google (NASDAQ:GOOG), Qualcomm (NASDAQ:QCOM) and Amazon (NASDAQ:AMZN).
Bartolo also realizes that it’s important to have a long-term approach, which helps to even out the volatility. The turnover ratio is a moderate 30%.
2012 Return: 7.27%
Assets: $22.1 billion
Dividend investing has certainly been hot lately. And a top fund in the category is the BlackRock Equity Dividend (MUTF:MDDVX).
Portfolio manager Robert Shearer likes to invest in firms that have huge barriers to entry. This helps make it possible for them to pay hefty dividends for the long term. Some of his holdings include Chevron (NYSE:CVX) and Wells Fargo (NYSE:WFC).
Shearer also has invested in emerging markets, which have a growing number of top-notch companies.
2012 Return: 11%
Assets: $81.3 billion
Will Danoff, who manages the Fidelity Contrafund (MUTF:FCNTX), is one of the world’s best portfolio managers. Over the past decade, he has generated a 9% average annual return.
Danoff is fairly opportunistic, with a portfolio that ranges from 300 to 500 companies. It’s a lot to manage, but its size has helped in finding strong returns. Keep in mind that Danoff likes to buy smaller stocks as well. For example, he started buying shares in Apple in 2003, when it was a just a fraction of its current size.
2012 Return: 7.91%
Assets: $41.3 billion
With the sovereign debt crisis in Europe and slowing growth in China, it’s been tough to make money in foreign markets. But opportunities still exist.
Just look at American Funds New Perspective (MUTF:NPFFX), which has been able to navigate the treacherous volatility. To get better coverage, the fund uses multiple managers. Let’s face it, foreign investing is incredibly complex.
The American Funds has also emphasized lower-risk themes. These have included investments in sectors like health care and consumer staples.
2012 Return: 7%
Assets: $263.4 billion
Last year, PIMCO Total Return Fund (MUTF:PTTRX) had a tough run, with a gain of only 4.16%. Its legendary portfolio manager, Bill Gross, missed the huge rally in Treasuries. Because of this, the Total Return fund had its first outflows since the late 1980s.
So, is Gross washed up? Not so fast. In 2012, he has staged a huge comeback. He has even recouped all the capital outflows. Yes, Gross wisely bulked up on Treasuries. But he also found some nice returns in mortgage securities, emerging markets debt and junk bonds.
Tom Taulli runs the InvestorPlace blog IPO Playbook, a site dedicated to the hottest news and rumors about initial public offerings. He is also the author of the upcoming book How to Create the Next Facebook: Seeing Your Startup Through, from Idea to IPO. Follow him on Twitter at @ttaulli or reach him via email. As of this writing, he did not own a position in any of the aforementioned securities.
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