USAA: Does It Add Value?

We continue our study of the ability of the leading mutual fund families to add value (generate alpha). Today, we look at the equity funds of USAA, with assets of more than $40 billion. Its Web site proudly proclaims: "We offer Lipper Award winning funds and funds with four- and five-star ratings from Morningstar." We'll compare the performance of USAA's actively managed equity funds to the similar funds from the two leading providers of passively managed funds -- Dimensional Fund Advisors (DFA) and Vanguard. The table below provides the comparisons for the 10-year period ending June 30, 2011.

Of the five asset classes, USAA only outperformed DFA and Vanguard in one. An equally weighted portfolio from USAA underperformed an equally weighted DFA portfolio by 1.1 percent per year and a Vanguard portfolio by 0.3 percent a year. Once again, while we do see occasional outperformance by some individual funds, we also see that the odds of a portfolio of actively managed funds outperforming a portfolio of passively managed ones are extremely low.

More on MoneyWatch:
Legg Mason: Does It Add Value? Fidelity: Does It Add Value? John Hancock: Does It Add Value? How Are 2011's Sure Things Faring at Mid-Year? How Misleading Maturities Make Bond Funds Riskier
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