Using their database of U.S.-based ETFs and mutual funds, Amy Arnott at Morningstar ranked the 15 top wealth creators in the industry in order to determine which funds have garnered the most value. Arnott’s method focused on funds the increased the most in asset size from 2010 to 2021, recognizing that the funds that were historically the most successful would get higher inflows; i.e., “the big generally get bigger.”
Arnott’s list is comprised of well-known names. Eight out of the 15 funds are passive strategies with low fees; focusing on broad market indexes has been a successful approach. One exception is the Fidelity Contrafund, which generated billions in asset growth throughout the 1990s. Though it hasn’t reached those heights again for some time, it’s still creating enormous dollar value for its shareholders. Meanwhile, the actively-managed American Funds has also made billions in shareholder value through its more conservative approach, creating portfolios that are widely diverse and avoiding risky bets and quick trades, the article details.
It’s not surprising that Vanguard is at the top of Arnott’s list, creating $4.1 trillion in wealth as opposed to Fidelity’s $2 trillion. iShares, State Street, Franklin Templeton, T. Rowe Price, and MFS are all in the top 10 alongside American Funds. Arnott found that the more basic the fund, the better it performed; the large-blend category ranked highest, making roughly $4.5 trillion in shareholder value. Large-blend funds offer investors a wide array of exposure to high-flying mega-cap stocks in addition to some mid-cap companies. And while bond funds didn’t make it onto the list, they did garner passable returns during the period that Arnott examined. Meanwhile, funds on the growth side claimed only 3 out of the top 10 categories, despite the fact that growth dominated value during the 2010-2021 decade by an average of more than 5% each year. Tech stocks created about $276.5 billion during the period, making them the highest-performing sector—though of course this was before their recent implosion, the article notes.
While it’s often believed that fund industry heavyweights have too much of a monopoly and ignore the best interests of their shareholders, Arnott’s list makes it clear that those funds have created enormous value, thereby rewarding their shareholders with significantly increased dollar value.
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