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Friday, April 05, 2013

Where Do Active PMs Crush Their Passive Competitors?

News summary by MFWire's editors

Most large-cap equity PMs may fall short of their index fund competitors, but the reverse is true in at least one equity niche: preferred stocks.

Brendan Conway of Barron's highlights new research from Morningstar. The mutual fund ratings giant found that the one active open-end mutual fund in the space and all the closed-end funds beat the comparable ETFs and index funds over the past one and three years. And the open end fund and nine of the 12 CEFs still won over the past five years, too.

M*'s Cara Esser muses that managing preferred stocks' call risk, something an index fund ignores but an active manager can focus on, may account for the performance advantage on the active side.

Barron's cites the iShares S&P US Preferred Stock Index ETF [profile] and the PowerShares Preferred Portfolio [profile] on the passive side. The Nuveen Preferred Securities Fund [profile] is the one active open-end mutual fund in the space. 

Edited by: Neil Anderson, Managing Editor

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