If the best mutual funds in the investment universe were chosen on merit alone, very few of them would be the biggest funds. But, alas, the mutual fund industry is not a meritocracy! And, as a result, there are too many mutual funds that have large assets under management figures despite being poor performers.

Fortunately, you have your faithful InvestorPlace mutual funds contributor to tell you precisely which of the biggest mutual funds have some of the least impressive returns in recent years.

I began my search with all mutual funds that have more than $50 billion in assets under management. This provided a list of about 25 of the biggest mutual funds in the world today, not counting the various share class versions of each fund. I then reviewed the past performance for the 1-year, 3-year, 5-year and 10-year returns and highlighted funds that performed below-average for at least two of those time periods.

There were several “finalists,” but here are the final three that are the biggest mutual funds with the worst returns.

PIMCO Total Return R (PTRRX)

Pimco Total Return R (PTRRX), combined with the other share classes offered for the fund, was once the biggest mutual fund in the world, as measured by assets under management. Although still one of the biggest funds in the investment universe the Total Return fund recently suffered its 16th consecutive month of outflows.

Year-to-date, the 4.1% performance places the fund behind 83% of all other intermediate-term bond funds. Through August 31, the 1-year, 3-year and 5-year returns were all worse than 50th percentile rank.

You’ll have to go all the way out the the 10-year annualized return to find an impressive 18th percentile rank. However, that 10 years includes a time when manager Bill Gross was the star of the fixed income universe. Today and in recent years, that star has faded, and investors have good reason to be skeptical about future performance.

American Funds Washington Mutual B (WSHBX)

American Funds Washington Mutual B (WSHBX) has an embarrassingly poor 10-year performance rank of 68th percentile and a 15-year rank of 66. How did the American Funds staple lose to two-thirds of its category peers but attract nearly $73 billion? Obviously not by strong performance.

I chose a B-share (back-loaded) fund to demonstrate a point that mediocre funds are not bought … they are sold! American Funds became the third-largest mutual fund company in the world because stock brokers don’t make commissions from selling no-load funds. They like to sell funds with big names, high expenses, and loads.

Why is performance so poor? One problem is the 1.35% expense ratio. Another challenge is something I highlighted in my recent story, “Is There Any Reason to Buy American Funds?”, where I noted that the size of the fund forces management to buy more holdings at higher market caps, which eventually makes it look like an index fund. But the expenses drag performance below the index and that of the category average.

BlackRock Global Allocation Inv A (MDLOX)

BlackRock Global Allocation Inv A (MDLOX), in combination with its other share class versions, has nearly $60 billion in assets under management but more than 80% of all other funds in its global allocation category performed better in the past 5 years. The 1-year and 3-year returns also rank worse than the majority of category peers.

Like the PIMCO Total Return fund on this big-but-bad list, MDLOX does have an impressive 18th percentile rank for the 10-year return. But the larger question is what will future returns look like? The fund’s current asset allocation and regional exposure don’t make it more conservative than similar funds. Therefore, there is no apparent and justifiable reasoning for the fund’s under-performance than some combination of size and poor security selection.

Based upon its lethargic size, it’s hard to imagine this fund springing back into old form any time soon.

As of this writing, Kent Thune did not hold a position in any of the aforementioned securities. Under no circumstances does this information represent a recommendation to buy or sell securities.