one adviser has found that fledgling funds can provide higher returns. Domestic equity funds in their rookie year outperformed their mature counterparts by an average of 3.7 percentage points, according to a study by Kobren Insight Group, Wellesley Hills, Mass. "The findings reinforce that investors may be missing out on substantial profit opportunities by ignoring new funds which otherwise meet their portfolio requirements," said Eric Kobren, president. His company publishes several investment newsletters and offers money management services. Kobren looked at all 1,181 diversified domestic equity funds that existed before 1996 and had assets of at least $25 million. It classified 721 of those as new funds, launched between January 1988 and December 1995. The study, released last week, found that two-thirds of the new funds beat their seasoned counterparts in their first year, and 61% did so in their second year. The new-fund advantage was not evenly distributed across market- capitalization and investment-style categories, however. Small-cap growth funds fared best in their rookie year, outperforming more established funds by an average of 9.2 points. Mid-cap funds that blended the growth and value approaches had the slimmest advantage in their start-up year, beating seasoned funds' performance by 1.2 points. The new funds lost some of their edge in their second year, beating more established funds by 2.5 points on average. Results ranged from an extra 1 point for large-cap growth funds to an extra 7.5 points for small-cap growth funds. Why did the rookies outperform the pros? The Kobren study said their advantages included having "no tax decisions, a clean slate, a more concentrated portfolio, a smaller, more nimble asset base, steady cash flow, greater management attention, and opportune launch timing."

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