Fiduciary Analytics' ratings are not considered the Holy Grail either. There are fund families with below-average Fiduciary Analytics ratings that have solid-performing stock funds, and vice versa. And Fiduciary Analytics' top-ranked firm, Baron Asset Management, was fined almost $3 million in 2003 by the SEC for violating certain trading rules, though Baron violated these rules on behalf of shareholders rather than at their expense.
   

    Trone's firm ranks 247 fund families. He says that he never has looked at the statistical correlation between fiduciary ratings and performance.

    However, based on this author's analysis of both Fiduciary Analytics and Morningstar data, there appears to be a strong relationship between the fiduciary ratings and fund family stock funds' performance. There are 161 fund families rated by Fiduciary Analytics that carried Morningstar's equity "fund family scores."

    The Morningstar "fund family score" is an asset-weighted average of a fund company's Morningstar (performance) ratings, also known as "star
ratings," within an asset class. The score can help an advisor gauge a company's overall ability within a specific asset class. The scores range from 1.0 to 5.0. A score below 2.5 is an indication that a firm has met with little success in that asset class. A score between 2.5 and 3.5 indicates the firm is about average. A score above 3.5 indicates a firm is above average.

    A word to the wise: For the relationship between fiduciary ratings and fund performance to be definitive, several years worth of data must be analyzed. Because both rating systems are new, any relationships should be consider preliminary. The shorter the analysis period, the greater the impact random chance has on the data.

    Nevertheless, this author broke into decile groups all fund families that carried both Fiduciary Analytics' ratings and Morningstar's Fund family scores for domestic stock funds. Decile group one represents the top 10% of fund families based on Fiduciary Analytics' fiduciary ratings.  The tenth decile group represents the bottom 10% of fund families.  

    The results show that the higher the Fiduciary Analytics ranking, on average, the higher the Morningstar Fund family stock fund score.

    Funds ranking in the top Fiduciary Analytics decile group (one) on average registered higher Morningstar Fund family scores than decile groups two through ten. The second and third Fiduciary Analytics decile groups also registered higher Morningstar fund family scores than the lower decile groups. But there was not much difference in scores for fund groups ranked in the bottom half of the list.  

    The number one decile group had a mean fund family score of 4.0. The second decile mean score was 3.5. The third decile group's mean score also
was 3.5. The fourth and fifth decile group each had mean scores of 3.2. The sixth and seventh decile groups each had mean scores of 3.0.

    The eighth decile group's mean score was 2.8; the ninth's mean rating was 2.7; and the tenth's mean rating was 2.6.