There appears to be strong correlation between the third quarter 2004 decile rankings based on Fiduciary Analytics and the average Morningstar's
equity fund family score per group. But until there is more data, it is inappropriate to conduct a correlation statistic based on normally distributed data.

    Not all mid-ranked fund families exhibit poor performance. For example, the Oakmark group of funds was in the fourth decile group based on Fiduciary's ratings. But Oakmark's stock fund Morningstar fund family score was above average at 3.6.

    The Davis Funds, based on Fiduciary Analytics' ranking, were in the fourth decile group, but its stock funds registered an above-average 4.6 Morningstar Fund family score. Meanwhile, the Thornburg fund group was ranked in Fiduciary Analytics' sixth decile group, but the Morningstar fund family score also was above average at 4.

    Fiduciary Analytics top-rated funds were not necessarily delivering superior investment returns either. For example, the USAA fund family ranked in Fiduciary Analytics' first decile group, but its funds were rated an average Morningstar Fund family score of 3. TIAA-CREF was in the second decile group based on its Fiduciary Analytics rating. However, its stock funds carried just a 2.4 Morningstar Fund family score. The RS Funds were also in the second decile group based on Fiduciary Analytics' ratings, but the Morningstar Fund family score was below average at just 2.3.

    "In the fiduciary world, the best is a slippery slope," Trone concedes.

    Fiduciary ratings, he says, are just another due diligence tool. The best-performing funds may not always have the best fiduciary ratings.

    Nevertheless, funds with top fiduciary ratings exhibit several strong characteristics that include:

    Style discipline. The fund family's mutual funds do not deviate from their stated investment style.
        Reasonable fees. Fund expense ratios are not excessive.
        Sound management. The fund managers' tenure is important, as well as the investment company's ability to garner assets.

    Trone adds that large fund families typically score well. But small fund groups that have one investment style may also score well.

    Investment companies with poor fiduciary scores characteristically have a weak organization that can't retain talent. They also have high fees, and their funds exhibit style drift.