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Wall Street, California: Quarterly Review and Outlook

Category Champs

March 31, 1998

Morningstar publishes an annual list in March of the five fund families whose funds dominate each of four investment categories. The fund-tracking firm also chooses one loser for each category.

DOMESTIC EQUITY

Domestic stock, specialty stock, domestic hybrid, convertible

1. T. Rowe Price

Low risk comes through to put this family on top again despite less-impressive 1997 returns.

2. Vanguard

Ultra-low expenses and a thriving market have kept its large-cap index funds ahead of most actively managed funds.

3. MFS

A growth-at-a-reasonable-price strategy focusing on industry leaders has been the source of this family's strength.

4. Janus

Growth & Income and Twenty have strong records, but what happens now that fund manager Tom Marsico is gone? At least he wasn't running top-rated Balanced too.

5. Scudder

This family has done a solid job running large-cap funds, especially ones on the value side.

Loser: Smith Barney

Half of these funds land in the middle of the pack; the rest can't manage even that.

*

INTERNATIONAL

Foreign, world, hybrid, emerging markets, regional, precious metals

1. Oppenheimer

Thematic investing has worked well; good picks in the thriving U.S. market have given world-stock funds a boost.

2. American Funds

World-stock funds hold many of the stocks that power American's best U.S. funds. That conservative blue-chip focus works well in foreign markets too.

3. Scudder

Boasts of top-notch Greater Europe Growth, and of one of the best funds in the much-beleaguered precious-metals category.

4. Aim

The firm's earnings-momentum style still has an edge when it comes to investing overseas.

5. Putnam

No losers here. International Growth's pursuit of firms with improving intrinsic value has made it a standout performer.

Loser: Dean Witter

Stalwart European Growth can't adequately shoulder the burden of its poor-performing siblings.

*

TAXABLE BOND

Government, general, high-yield, international, multi-sector

1. MAS

Powered by finding good values in bond sectors and along the yield curve; low expenses help.

2. Pimco

Another dominant institutional group. Astute departures from benchmarks drive performance. Also sub-advises Harbor Bond.

3. Federated

Solid offerings in everything from short-term government to high-yield funds; international-bond fund is only dark spot.

4. IDS

Interest-rate plays helped these funds romp past the competition in 1995 and 1997.

5. Fidelity

A strategic overhaul brings this dark horse into the light.

Loser: Dean Witter

Would at least be more competitive without above-average expenses.

*

MUNICIPAL BOND

National, single state

1. USAA

Lots of strong funds in both the national and single-state arenas. All have reasonable risk scores and top-notch returns.

2. Franklin Templeton

A strong performer continues to thrive with its big-yielding funds.

3. Oppenheimer

Delivers below-average risk and competitive returns.

4. Smith Barney

Worst offering is middle of the pack. The rest have attractive returns and reasonable risk.

5. Delaware

Lots of competitive single-state funds.

Loser: Eaton Vance

High expenses plus surprising amount of risk brings this family a repeat loser rating.

Methodology

Rankings were calculated as of Jan. 31, by averaging funds' category ratings, which measure three-year risk-adjusted but not load-adjusted performance. Rankings were calculated for four asset classes: domestic equity, international equity, taxable bond and municipal bond. To qualify, a family must have at least three offerings in the asset class and be among the 20 largest families (in terms of assets managed) for that class. For funds with more than one share class, only the oldest class was counted in the average.

Source: Morningstar

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