What Are Lipper Indexes?
Lipper Indexes are tools that track the financial performance of various managed fund strategies. Each index reflects the performance of the largest publicly traded funds within specific strategy groups.
Key Takeaways
- Lipper Indexes serve as benchmarks for actively-managed mutual fund performance, spanning a range of strategies and asset classes.
- Anywhere from 30 to 100 individual funds may be used to gauge an index’s performance, depending on the strategy.
- These indexes are vital references for reporting fund performance to investors and analysts.
Understanding Lipper Indexes
Lipper Indexes are constructed and overseen by Lipper, part of the larger Reuters organization. Lipper curates indexes for virtually every type of mutual fund strategy available in the market. The performance of these indexes is publicly disclosed by reputable platforms like the Wall Street Journal and Barron’s.
To build each index, Lipper averages the returns of funds governed by the specific strategy of the index. Funds selected for calculating index returns are chosen based on their assets under management (AUM). Typically, each Lipper Index uses a broad range of funds, approximately 30 to 100, to derive its performance metrics.
Lipper Indexes are commonly featured in mutual fund performance reports. Investment managers use Lipper data in client reports and may employ a particular Lipper Index as a primary benchmark for their mutual fund’s performance.
Lipper Index Analysis
Lipper Indexes offer invaluable insights to retail investors on top-performing strategies and the performance of various investment approaches across different market periods. Lipper provides data on the best and worst-performing indexes across multiple categories, aiding investor decisions.
For example, one-year Lipper Index returns as of July 24, 2021, showcased the Lipper Upright Growth Fund as the leading strategy in the global equity category, with a return of 168.7%. Conversely, the Lipper SGA International Equity Fund was the worst-performing strategy in the same category, with a return of -82.02%. This performance data varies annually, and new funds are continuously created while older ones may wind down.
In the bond market, the standout strategy over the past year was the Lipper UBS FI Enhanced Global High Yield, achieving a one-year return of 24.17%. On the flip side, the Lipper Intermediate US Government Index lagged with a return of -0.87%.
In the money market category, returns were relatively modest over a one-year period through Jan. 5, 2018. The Lipper Transamerica Government Money Market Fund led the pack with a return of 0.2%, while the Lipper Legg Mason Partners Premium Money Market Trust performed the lowest with a return of 0.01%.
Related Terms: mutual funds, assets under management, benchmarking, investment analysis, performance tracking.
