While
Advisor Perspectives found that the probability of five-star rated bond funds beating four-star rated bond funds is 63%, but that declines to 59% for balanced funds, to 55% for U.S. equity funds and to 48% for international equity funds.
Advisor Perspectives also said that returns on highly rated U.S. stock funds over a three-year period were slightly lower than index funds.
But pointing to the differences between five-star and one-star funds, Morningstar believes otherwise. John Rekenthaler, vice president of research at Morningstar, said, “The star ratings are a good starting point. In some cases, as much as 80% of five-star funds outperformed one-star funds over the next time period.”
Steve Persky, managing partner with