S&P Research on Fees Show Cheaper Funds Continuing to Outperform Their More Expensive Peers NEW YORK, June 29 /PRNewswire/ -- In a review of the fees being levied upon investors by equity mutual funds, Standard & Poor's -- a leading provider of independent investment research, ratings and indices -- has determined that funds with lower than average expense ratios are continuing to outperform their more expensive peers over the long-term. According to Standard & Poor's database of over 17,000 U.S. mutual funds, funds charging smaller than average fees to investors outperformed their more expensive counterparts in 8 out of the 9 investment styles over a one-, three-, five-, and ten-year annualized basis. The only investment style to buck the trend is mid-cap blend, whose five- and ten-year annualized returns outpaced their less expensive peers. "Few, if any, fund characteristics can be linked to performance more so than the level of expenses," adds Standard & Poor's Managing Director, Phil Edwards. "As Standard & Poor's research has shown for the second consecutive year, high levels of expenses can significantly eat away at a fund's overall performance. It is important for both investors and financial advisors to keep fund expenses in the forefront of their analysis when assembling a portfolio." To reach its conclusions, Standard & Poor's determined the average expense ratio for each of the nine domestic fund styles, and then sorted the funds into two categories - those with an expense ratio below the average of their peers and those with an expense ratio that was higher. The average annualized return for each of the two categories was compared over a one-, three-, five-, and ten-year performance period to determine if a fund's return justified the level of its expenses. Standard & Poor's concluded that for funds with larger than average expense ratios a higher return was not necessarily something investors came away with. "Given the results of this study, it is clear that expenses continue to play a significant role in the overall return of a mutual fund," continues Edwards. "Since a fund's expenses are typically stated in percentage terms, it is often difficult for investors to understand the cost implications. Standard & Poor's believes that investors would be better served by stating expenses in dollar and cents terms." A table showing the average performance of the funds with expense ratios above and below the average for their investment style can be found at the end of this release. Style Category 1-Year 3-Year 5-Year Return(%) Return(%) Return(%) Large-Cap Growth Fund Funds Above Average Expense Ratio 14.75 -6.97 -5.04 Funds Below Average Expense Ratio 16.07 -5.32 -3.37 Large-Cap Blend Fund Funds Above Average Expense Ratio 14.93 -3.89 -2.50 Funds Below Average Expense Ratio 17.27 -2.51 -1.26 Large-Cap Value Fund Funds Above Average Expense Ratio 17.74 -1.53 0.84 Funds Below Average Expense Ratio 18.79 0.01 1.81 Mid-Cap Growth Fund Funds Above Average Expense Ratio 21.03 -4.45 0.69 Funds Below Average Expense Ratio 22.83 -3.14 2.39 Mid-Cap Blend Fund Funds Above Average Expense Ratio 23.35 3.38 8.37* Funds Below Average Expense Ratio 25.47 4.93 7.99 Mid-Cap Value Fund Funds Above Average Expense Ratio 25.94 6.89 8.01 Funds Below Average Expense Ratio 26.18 7.29 9.83 Small-Cap Growth Fund Funds Above Average Expense Ratio 26.04 -2.58 2.88 Funds Below Average Expense Ratio 27.50 -0.77 5.65 Small-Cap Blend Fund Funds Above Average Expense Ratio 30.67 5.60 7.83 Funds Below Average Expense Ratio 30.01 7.33 9.79 Small-Cap Value Fund Funds Above Average Expense Ratio 30.73 9.39 12.20 Funds Below Average Expense Ratio 31.78 11.22 13.33 Style Category 10-Year Average Value Return(%) Expense of Ratio $1,000 Invested 10 Years Ago Large-Cap Growth Fund Funds Above Average Expense Ratio 7.19 2.14 $2047 Funds Below Average Expense Ratio 8.90 1.09 $2388 Large-Cap Blend Fund Funds Above Average Expense Ratio 7.93 1.85 $2210 Funds Below Average Expense Ratio 10.01 0.75 $2632 Large-Cap Value Fund Funds Above Average Expense Ratio 9.19 1.93 $2441 Funds Below Average Expense Ratio 10.53 0.99 $2762 Mid-Cap Growth Fund Funds Above Average Expense Ratio 6.56 2.39 $2145 Funds Below Average Expense Ratio 9.47 1.23 $2604 Mid-Cap Blend Fund Funds Above Average Expense Ratio 12.13* 1.84 $3118 Funds Below Average Expense Ratio 12.12 0.80 $2767 Mid-Cap Value Fund Funds Above Average Expense Ratio 11.01 2.02 $3155 Funds Below Average Expense Ratio 12.21 1.16 $3205 Small-Cap Growth Fund Funds Above Average Expense Ratio 6.47 2.38 $2,004 Funds Below Average Expense Ratio 10.29 1.36 $2,755 Small-Cap Blend Fund Funds Above Average Expense Ratio 10.72 2.03 $2830 Funds Below Average Expense Ratio 11.51 0.96 $3044 Small-Cap Value Fund Funds Above Average Expense Ratio 11.36 2.16 $2983 Funds Below Average Expense Ratio 13.40 1.20 $3568 * Denotes where funds with above average expense ratio outperformed less expensive peers Source: Standard & Poor's. Total returns include reinvested dividends. Data as of: 5/31/04 About Standard & Poor's Standard & Poor's is a leading global authority in funds research, providing comprehensive information on more than 80,000 equity, bond, and money market funds worldwide. A team of more than 43 professionals in 10 countries who analyze funds carry out three basic types of activities relating to mutual funds: fund selection, manager monitoring, and reporting and evaluation. In addition, Standard & Poor's also evaluates more than 16,000 U.S. mutual funds through its STARS ranking system. Standard & Poor's, a division of The McGraw-Hill Companies (NYSE: MHP), is the world's foremost provider of independent credit ratings, indices, risk evaluation, investment research, data and valuations. With 5,000 employees located in 20 countries, Standard & Poor's is an essential part of the world's financial infrastructure and has played a leading role for more than 140 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit http://www.standardandpoors.com. SOURCE Standard & Poor's Web Site: http://www.standardandpoors.com