Morningstar Magazine - August/September 2017 - 37

but not all markets. There is insufficient
share-class-level data to run 10-year investor
returns in most markets outside the United States.
The lack of 10-year data is important because
investor return trends become more apparent
during longer periods that include both up
and down markets. We calculated the returns for
share classes where the data is available
to start the discussion while we await moredefinitive data.
To aggregate fund investor returns data,
we asset-weight investor returns using average
assets under management during the period
being measured. Then, we compare the assetweighted return to the average fund's total return.
Essentially, we are comparing the average
fund's return in each peer group to the average
investor experience. The gap between the
two figures tells us how well investors timed their
investments in the aggregate. Exchange-traded
funds were not included because it is difficult
to estimate investor intent.

We also sorted investor returns based on a few
factors to see which appear to have a link
with investor returns. For this report, we tested
fees, Morningstar Risk, standard deviation, and
manager tenure. These tests may be the most
important part of the study because they suggest
which kinds of funds investors use well.
This study also uses global fund groupings. Some
of the groupings used in previous U.S. studies,
such as foreign and municipal bond, were rolled
into equity and fixed income. We use Luxembourg
as a proxy for Europe except for the U.K.
Strong Results for Automatic Plans

In the United States and Europe, we found
declining gaps between investor returns and total
returns ( EXHIB IT 1 ). In other markets where we
calculated investor returns for the first time,
we found generally modest gaps of less than 100
basis points. Again, we caution that data in
some of these markets is limited and, therefore,
not sufficient to draw strong conclusions.

every paycheck. In South Korea, general savings
plans feature automatic monthly investments,
though they are not the only means of
investing in funds. These relatively simple plans
work wonders at keeping investors on track
and preventing them from unwise market-timing
moves. Seeing this work in three different
investment cultures is a strong endorsement for
the practice worldwide.
Automatic investment plans are a structure
that regulators around the world are considering
as a way to encourage retirement savings.
The most recent example is the launch of the
Default Investment Strategy in Hong Kong. The
evidence suggests the idea has merit for its
ability to help investors realize the potential of
retirement plans. In a sense, it combines some of
the strengths of defined-benefit plans and
defined-contribution plans by making low-cost
diversified investments the default option.

This global study also considers asset-weighted
total returns based on funds' asset sizes
at the beginning of the time period, while our
previous U.S.-based studies considered fund sizes
at the end of the period. Comparing this with
asset-weighted investor returns tells us whether
investors made wise changes in the ensuing time
period or whether they should have stood pat.

In South Korea, investors had particularly
good timing in fixed-income funds. In Australia,
superannuation funds enjoyed positive gaps.
In the U.S., allocation funds had positive gaps. The
link across these markets were automatic
investment plans. In the U.S., target-date funds
have consistently had positive gaps because
investors contribute to their 401(k) savings with

The overall 10-year gap in the U.S. has shrunk from
55 basis points at the end of 2015 to 37 basis
points at the end of 2016. Adding another year of
solid market returns likely helps. A second
factor that is driving the aggregate gap lower over
the long haul is that yearly flows have not kept
pace with the growth in assets under management.
Thus, in the aggregate mutual fund investors are
making fewer market-timing calls that can harm
results. However, that doesn't mean the challenge

South Korea
5-Year Investor Return

United Kingdom
5-Year Investor Return

Singapore
5-Year Investor Return

3.01
2.71
2.95

Australia
5-Year Investor Return
10.18
8.72
9.83

3.46
2.46
1.52

3.71
3.24
3.87
2.85
2.64
2.02

7.11
7.66

15.73
15.15
15.11
4.65
4.40
4.54
10.37
10.65
9.61

3.89
4.81

N/A

12.63
12.49
11.87

5.08
5.73
2.50

Taiwan
5-Year Investor Return

N/A
11.97
11.98

N/A

4.31
6.68

12.35
12.62
N/A

5.10
5.74
N/A

8.78
N/A

N/A

N/A
9.71
9.79

5.82

6.56
7.26

7.46
7.23

3.02
3.29

N/A

N/A

N/A

N/A

3.64
4.66

3.71
8.02

7.44
7.30

6.23
6.51

N/A

3.90
4.15
N/A

N/A

Hong Kong
5-Year Investor Return

N/A
2.80
3.24

2.70
3.17
N/A

N/A
4.73
6.04

4.50
5.90
N/A

N/A

global.morningstar.com/Morningstarmagazine

37


http://global.morningstar.com/Morningstarmagazine

Table of Contents for the Digital Edition of Morningstar Magazine - August/September 2017

Contents
Morningstar Magazine - August/September 2017 - Cover1
Morningstar Magazine - August/September 2017 - Cover2
Morningstar Magazine - August/September 2017 - 1
Morningstar Magazine - August/September 2017 - 2
Morningstar Magazine - August/September 2017 - Contents
Morningstar Magazine - August/September 2017 - 4
Morningstar Magazine - August/September 2017 - 5
Morningstar Magazine - August/September 2017 - 6
Morningstar Magazine - August/September 2017 - 7
Morningstar Magazine - August/September 2017 - 8
Morningstar Magazine - August/September 2017 - 9
Morningstar Magazine - August/September 2017 - 10
Morningstar Magazine - August/September 2017 - 11
Morningstar Magazine - August/September 2017 - 12
Morningstar Magazine - August/September 2017 - 13
Morningstar Magazine - August/September 2017 - 14
Morningstar Magazine - August/September 2017 - 15
Morningstar Magazine - August/September 2017 - 16
Morningstar Magazine - August/September 2017 - 17
Morningstar Magazine - August/September 2017 - 18
Morningstar Magazine - August/September 2017 - 19
Morningstar Magazine - August/September 2017 - 20
Morningstar Magazine - August/September 2017 - 21
Morningstar Magazine - August/September 2017 - 22
Morningstar Magazine - August/September 2017 - 23
Morningstar Magazine - August/September 2017 - 24
Morningstar Magazine - August/September 2017 - 25
Morningstar Magazine - August/September 2017 - 26
Morningstar Magazine - August/September 2017 - 27
Morningstar Magazine - August/September 2017 - 28
Morningstar Magazine - August/September 2017 - 29
Morningstar Magazine - August/September 2017 - 30
Morningstar Magazine - August/September 2017 - 31
Morningstar Magazine - August/September 2017 - 32
Morningstar Magazine - August/September 2017 - 33
Morningstar Magazine - August/September 2017 - 34
Morningstar Magazine - August/September 2017 - 35
Morningstar Magazine - August/September 2017 - 36
Morningstar Magazine - August/September 2017 - 37
Morningstar Magazine - August/September 2017 - 38
Morningstar Magazine - August/September 2017 - 39
Morningstar Magazine - August/September 2017 - 40
Morningstar Magazine - August/September 2017 - 41
Morningstar Magazine - August/September 2017 - 42
Morningstar Magazine - August/September 2017 - 43
Morningstar Magazine - August/September 2017 - 44
Morningstar Magazine - August/September 2017 - 45
Morningstar Magazine - August/September 2017 - 46
Morningstar Magazine - August/September 2017 - 47
Morningstar Magazine - August/September 2017 - 48
Morningstar Magazine - August/September 2017 - 49
Morningstar Magazine - August/September 2017 - 50
Morningstar Magazine - August/September 2017 - 51
Morningstar Magazine - August/September 2017 - 52
Morningstar Magazine - August/September 2017 - 53
Morningstar Magazine - August/September 2017 - 54
Morningstar Magazine - August/September 2017 - 55
Morningstar Magazine - August/September 2017 - 56
Morningstar Magazine - August/September 2017 - 57
Morningstar Magazine - August/September 2017 - 58
Morningstar Magazine - August/September 2017 - 59
Morningstar Magazine - August/September 2017 - 60
Morningstar Magazine - August/September 2017 - 61
Morningstar Magazine - August/September 2017 - 62
Morningstar Magazine - August/September 2017 - 63
Morningstar Magazine - August/September 2017 - 64
Morningstar Magazine - August/September 2017 - 65
Morningstar Magazine - August/September 2017 - 66
Morningstar Magazine - August/September 2017 - 67
Morningstar Magazine - August/September 2017 - 68
Morningstar Magazine - August/September 2017 - 69
Morningstar Magazine - August/September 2017 - 70
Morningstar Magazine - August/September 2017 - 71
Morningstar Magazine - August/September 2017 - 72
Morningstar Magazine - August/September 2017 - 73
Morningstar Magazine - August/September 2017 - 74
Morningstar Magazine - August/September 2017 - 75
Morningstar Magazine - August/September 2017 - 76
Morningstar Magazine - August/September 2017 - 77
Morningstar Magazine - August/September 2017 - 78
Morningstar Magazine - August/September 2017 - 79
Morningstar Magazine - August/September 2017 - 80
Morningstar Magazine - August/September 2017 - Cover3
Morningstar Magazine - August/September 2017 - Cover4
Morningstar Magazine - August/September 2017 - Cover1I
Morningstar Magazine - August/September 2017 - Cover2I
Morningstar Magazine - August/September 2017 - I3
Morningstar Magazine - August/September 2017 - I4
Morningstar Magazine - August/September 2017 - I5
Morningstar Magazine - August/September 2017 - I6
Morningstar Magazine - August/September 2017 - I7
Morningstar Magazine - August/September 2017 - I8
Morningstar Magazine - August/September 2017 - I9
Morningstar Magazine - August/September 2017 - I10
Morningstar Magazine - August/September 2017 - I11
Morningstar Magazine - August/September 2017 - I12
Morningstar Magazine - August/September 2017 - I13
Morningstar Magazine - August/September 2017 - I14
Morningstar Magazine - August/September 2017 - I15
Morningstar Magazine - August/September 2017 - I16
Morningstar Magazine - August/September 2017 - I17
Morningstar Magazine - August/September 2017 - I18
Morningstar Magazine - August/September 2017 - I19
Morningstar Magazine - August/September 2017 - I20
Morningstar Magazine - August/September 2017 - I21
Morningstar Magazine - August/September 2017 - I22
Morningstar Magazine - August/September 2017 - I23
Morningstar Magazine - August/September 2017 - I24
Morningstar Magazine - August/September 2017 - I25
Morningstar Magazine - August/September 2017 - I26
Morningstar Magazine - August/September 2017 - I27
Morningstar Magazine - August/September 2017 - I28
Morningstar Magazine - August/September 2017 - I29
Morningstar Magazine - August/September 2017 - I30
Morningstar Magazine - August/September 2017 - Cover3I
Morningstar Magazine - August/September 2017 - Cover4I
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2024q1
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2023q4
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2023q3
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2023q2
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2023q1
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2022q4
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2022q3
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2022q2
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2022q1
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2021q4
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2021q3
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2021q2
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2021q1
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2020q4
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2020q3
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2020q2
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2020q1
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2019winter
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2019fall
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2019summer
https://www.nxtbook.com/nxtbooks/morningstar/magazine_2019spring
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20191201
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20181011
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20180809
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20180607
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20180405
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20180203
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20181201
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20171011
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20170809
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20170607
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20170405
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20170203
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20171201
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20161011
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20160809
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20160607
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20160405
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20160203
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20161201
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20151011
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20150809
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20150607
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20150405
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20150203
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20151201
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20141011
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20140809
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20140607
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20140405
https://www.nxtbook.com/nxtbooks/morningstar/magazine_20140203
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20141201
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20131011
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20130809
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20130607
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20130405
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20130203
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20131201
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20121011
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20120809
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20120607
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20120405
https://www.nxtbook.com/nxtbooks/morningstar/investorconference2012
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20120203
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20121201
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20111011
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20110809
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20110607
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20110405
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20110203
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20111201
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20101011
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100809_lincoln
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100809
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100607_lincoln
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100607
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100405_lincoln
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100405
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20100203
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20101201
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20091011
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20090809
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20090607
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20090405
https://www.nxtbook.com/nxtbooks/morningstar/advisor_20090203
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2008fall
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2008summer
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2007spring
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2007fall
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2007summer
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2008spring
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2008catalog
https://www.nxtbook.com/nxtbooks/morningstar/advisor_2008winter
https://www.nxtbookmedia.com