And, as those measures are based on past performance, we evaluated portfolio risk to capture dangers that may be lurking even if they haven't yet surfaced. Which factors are most important to you depends on your time horizon, your overall portfolio diversification, and ability to tolerate volatility. Their ways won't necessarily meet everyone's needs, but many investors will appreciate how deeply risk managment is ingrained in their systems. First and foremost, investors fear getting stuck with lemons. No fund company is going to produce a complete lineup of winners, but it's telling when one turns out a lot of outright duds.
Some firms simply suffer from subpar portfolio management across the board.
Occasionally the problem is an overeager marketing department that insists on hot-selling products regardless of their investment merits or the fund company's expertise in the field. Morgan Stanley Dean Witter, Alliance, and Dreyfus had the highest percentages of these cellar dwellars, followed by IDS and Merrill Lynch. All of these shops have proven standouts as well. But given their propensity to turn out clunkers, investors should be particularly wary before buying a new fund from one of them. That's a sign that they are more careful about which funds they roll out and about replacing managers who can't cut it.