U.S. large-cap mutual funds that are heavily overweighted in well-governed companies outperformed peers in both the three- and five-year periods ended Dec. 31, according to a joint study by Lipper and GovernanceMetrics International, a corporate governance rating firm. The outperformance isn't exhibited for one-year period.
Among the large-cap funds with the strongest average governance ratings for portfolio stocks, those with the highest three-year annualized returns were: Sequoia, Northern Funds Large-Cap Value, Hennessey Total Return, ING Corporate Leaders Trust, and TD Waterhouse Dow 30. Among those with the poorest average governance ratings, funds with the lowest three-year annualized returns were: ASAF ProFund Managed OTC, Van Kampen Select Growth, Jundt Twenty-Five, Gartmore Focus and Janus Mercury.
Lipper and GovernanceMetrics paired the stock holdings of 725 large-cap domestic equity mutual funds in Lipper's database with the governance ratings calculated by GMI. The GMI ratings reflect only 2003 characteristics, said Gavin Anderson, GMI president.
