Survivorship of mutual funds strikingly low.
An analysis of historical data indicated the importance of four factors:
Size: Larger funds are more likely to stay in business, a simple matter of economics.
Performance: Funds with good performance track records are more likely to survive.
Star ratings: The star system is in many respects a stronger proxy measure for survivorship than it is for identifying future top-performing funds.
Parent company stability: The fund's parent company is an important, but harder to evaluate factor in survivorship.
SOURCE: DANIELS. KERN, CFA,
PRESIDENT AND CHIEF INVESTMENT OFFICER FOR ADVISOR PARTNERS, WHICH CONDUCTED THE STUDY.