Morningstar Ranks Best and Worst Funds

T. Rowe Price Associates Inc. manages the best mix of U.S. stock mutual funds and Capital Research & Management Co. offers the best international funds.

At least that’s what Morningstar Inc. concludes in a study released this month.

The Morningstar report also says that Colonial Management Inc. markets the best taxable bond funds and that Franklin Resources Inc. is the premier municipal bond fund manager in the U.S.

Among the losers in the various categories are Merrill Lynch & Co., GT Capital Management Inc., Alliance Capital Management LP and Eaton Vance Corp., the Chicago-based research group reported.

“Evaluating families rather than funds may seem a bit archaic,” said Catherine Voss Sanders, a Morningstar analyst. “Still, the strengths and weaknesses of a fund family can reveal valuable information.

Morningstar based its fund company rankings on an average of the three-year performance of each of the funds in the group, taking into account both the returns and risks of funds managed by the 20 largest fund groups in each of the four asset classes.

An “honorable mention” in the domestic equities category goes to Putnam Investments, Voss Sanders said. Boston-based Putnam uses “style police” to make sure their funds don’t stray from their stated investment policy, she said.

Merrill Lynch was the worst domestic fund manager of the 20 companies Morningstar analyzed, Voss Sanders said.

Fidelity Investments, the No. 1 U.S. fund group, ranked ninth among 20 equity managers, behind OppenheimerFunds Inc. and ahead of the merging Aim Management Group Inc./Invesco fund group, according to Morningstar.