Institutional stock and bond mutual funds outperformed retail mutual funds in the three- and five-year periods ended March 31, according to a study by Kanon Bloch Carre, Boston, a mutual fund performance analysis firm.
The study, commissioned by Regis Retirement Plan Services Inc., New York, looked at 1,731 domestic retail funds with a minimum initial investment of less than $25,000 and 166 institutional funds from the largest institutional mutual fund management companies with a minimum initial investment of $25,000 or more.
All of the funds had track records of at least three years.
Part of the reason for the outperformance stems from the substantially lower expense ratios of institutional funds.
Investment performance of growth stock funds managed by institutional firms funds outperformed retail funds, returning on average 8.42% for the one year, and a cumulative 46.51% for the three years and 89.14% for the five years. Retail funds returned 6.69%, 40.52% and 84.96% respectively.
Growth and income funds managed by institutional firms outperformed retail funds in all but the one-year period. For the three- and five-year periods, they returned a cumulative 34.43% and 66.45% vs. 33.17% and 65.62% for retail funds. For the year, however, retail funds earned 2.96%, surpassing the 2.67% of the institutional funds.
For taxable bond funds, institutional funds also outperformed, returning 3.29%, 32.31% and 56.92% vs. 3.27%, 28.95% and 56.16% for retail funds.
But retail mutual funds outpaced institutional funds in the money market arena for the one-and three-year periods, earning 2.99% and 12.16% vs. 2.92% and 11.94% for institutional funds. For five years, institutional funds earned 31.55% vs. 30.72% for retail funds.