Payden: Does It Add Value?

On August 1, 2011 my colleague and Right Financial Plan co-author Kevin Grogan wrote about the Payden/Kravitz Cash Balance Fund (PKCBX). Given that Kevin had already looked at this particular fund, we would extend our analysis to their equity funds as well. As always, we will compare their performance to the performance of two leading providers of passively managed funds: Dimensional Fund Advisors (DFA) and Vanguard.

Unfortunately, Payden has only two equity funds with 10-year track records. Thus, we have only a small sample to examine.

Neither of the Payden funds managed to outperform either of the two DFA or the two Vanguard funds. An equally weighted portfolio of the two Payden funds returned just 1.3 percent per year versus 4.0 and 2.8 percent per year for the DFA and Vanguard funds, respectively.

Given the limited sample, we will expand our look for comparables. Payden also runs another equity fund, Payden Global Equity Fund (PYGEX), for which DFA and Vanguard have similar funds. PYGEX was launched in 2008. Its three-year return was -5.8 percent per year. Over the same period, the DFA Global Equity Portfolio (DGEIX) returned 4.4 percent per year and the Vanguard Total World Stock Index Fund (VTWSX) returned 1.7 percent per year. Thus, PYGEX underperformed DGEIX by 10.2 percent per year (a feat that would be hard to replicate if they tried) and underperformed VTWSX by 7.5 percent per year.

While Morningstar's ratings don't have any real predictive value, they do tell us about past performance. The returns Payden has delivered have earned the three funds the following ratings:

• PUGLX -- three stars
• PYVLX -- two stars
• PYGEX -- one star

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