Pioneer Funds To Choose or Not to Choose An Analysis of an ORP Introduction Purpose of Project – Who is eligible & Risks of ORP? – – Evaluate returns for those participating in the ORP provider’s fund offerings Investment strategy, tax situation, style of manager Manage own investments Temporal & Index Benchmark of Pioneer Group – 3 yr returns on S&P 500 Index Important Aspect of Mutual Funds What is a mutual fund? – Why you should invest in a mutual fund? – – “Pool of money” Diversify risk Time and Fund Management Expertise Disadvantages of mutual funds? – – Limits potential gains Diminished returns due to commission & fees Types of Mutual Funds Low-to-Medium Risk – Money market funds o – – Minimal trading activity Balanced funds o – High diversification Index funds o Grow capital, generate income Large cap funds o High Risk – ST securities, low rates Fund of funds o – Example: Wal-Mart Pure bonds o – Small cap funds o – Keep principal until maturity IPO, no dividends International funds o Volatility financial mkt. abroad History of Pioneer “Pioneer Fund” founded in 1928 by Philip Carret Philip Carret –friends with WARREN Buffet –Wizard of the market –13% average return in 55 yrs Pioneer Today Pioneer today is owned by Uni Credito Italiano Banking Group based in Milan Pioneer Investments has 180 investors in 4 cities: Boston, Dublin, Milian, and Sinagpore Investment in the US $35 Billion Investments in the World $150 Billion Approximately 40 different funds. Evaluation Method Three methods – Morningstar “Star” Rating 1-5 stars – – Compare to S&P – – Takes into account relative risk adjusted return over multiple time periods including all fees and expenses for 3 year return Compare to Benchmark – For 3 year return Pioneer Star Rating 16 14 12 10 8 # of Funds 6 4 2 0 1-Star 2-Star 3-Star 4-Star 5-Star NR Pioneer Funds vs. Benchmarks (3 Year Returns) Pioneer vs. Specific Benchmark (3 Year Returns) Return % Against Benchmark 12 7 2 -3 A B C D E F G H I J K L M N O P Q R S T U V W X Y -8 -13 Fund Name LEGEND A = Small Company H = International Equity B = Global High Yield I = Balanced C = Mid Cap Growth J = Fund B D = International Value K = High Yield E = Growth Opportunities L = Research F = Pioneer Small Cap Val M = Growth Shares G = Europe N = Value O = Mid Cap Value V = Municipal Bond P = Equity Income W = Bond Q = Tax Free Income X = Europe Select R = America Income Y = Strategic Income S = Cash Reserves Z = Emerging Markets T = Real Estate U = California Tax-Free Income Z Pioneer Fund Expense Ratios 2.5 2.32 1.78 2 1.50 1.5 1.00 1 Pioneer Avg. Industry * 0.5 0 Equity Fixed Income * Based on American Association of Individual Investors (AAII) recommendations Conclusion its in the results High expense ratios Under performed the S&P 500 index Under performed temporal benchmarks Low Morningstar ratings – Some non-existent Low management tenure – Recently purchased by a large banking group Conclusion Limitations Data collected using only Morningstar and Pioneer’s websites Needs a comparison to other ORP choices – Results tend to support EMH – – May not be the worst of the worst Too small of a sample to make assumption Only 40 funds analyzed Analysis can not account for luck – Good or Bad Conclusion Recommendation Pioneer funds should not be chosen for an ORP All ORPs should be evaluated Best choice may be an index strategy – Not an actively managed mutual fund strategy