Strategies · Core
Momentum in Mutual Fund Returns
Allocate to the mutual funds (or share classes) with the strongest trailing returns — momentum on the manager wrapper.
Definition
Rank funds on 3–12 month return, buy the winners, drop the losers, quarterly. Survivorship and fees are the landmines. You often just bought last year’s factor.
Why it matters
Flow chases performance; this rule is the chase, systematized. It can work if hot hands exist and die when they do not.
Case
A 2020–21 growth-fund winner list that was one factor. The ‘manager skill’ was duration.
How to read it
Share-class fees, incubation bias, and factor adjustment. Raw return rank is a style bet.
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