For mutual funds, its lonely at the top and deadly at the bottom.
Very few funds have been able to maintain a top quartile ranking over the years, according to the S&P Dow Jones Indices S&P Persistence Scorecard. But the outlook was even worse for funds mired in the fourth quartile, which had a much higher rate of being merged and liquidated.
Only 7% of the nearly 700 mutual funds that were in the top quartile as of September 2011 were still there two years later, according to the S&P scorecard.
Broken down by category, only 5% of the large-cap funds, 10% of the mid-cap funds and 8% of the small-cap funds remain in the top quartile from September 2011 to September 2013.
For the three years ended September 2013, 19% of large-cap funds, 20% of mid-cap funds and 26 % of small-cap funds maintained a top-half ranking over three consecutive 12-month periods.
Random expectations, S&P noted, would suggest a repeat rate of 25% -- yet small-cap was the only fund category to exceed the repeat rate.
Longer-term performance was even more challenging. Only 7% of large-cap funds, 0.88% of mid-cap funds and 10% of small-cap funds maintained a top-half performance over five consecutive 12-month periods. Random expectations would suggest a repeat rate of 6.25%.
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