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WASHINGTON, D.C.///December 6, 2007///Even though they are paying for brokers to assist them, investors in load-carrying mutual funds end up making significantly worse timing decisions than investors in no-load funds, underperforming their own funds' reported returns by three times as much as no-load fund investors, according to a major new study sponsored by the Zero Alpha Group (ZAG).

The study finds that mutual fund investors in all three principal load-carrying retail share classes (A, B, and C) experience worse timing than investors in pure no-load funds and no-load index funds, indicating that investors in load funds who pay for a broker's investment advice actually suffer more when it comes to timing. The reported return performance of a mutual fund, net of expenses, is generally assumed to represent the performance also obtained by the shareholders in the fund. However, in many cases, the actual performance experienced by shareholders differs substantially from the performance of the funds in which they invest. This discrepancy arises due to the timing of investor cash flows.

Entitled "Investor Timing and Fund Distribution Channels," the ZAG-sponsored study is co-authored by: Mercer Bullard, founder and president, Fund Democracy, and securities law professor, University of Mississippi School of Law; Geoff Friesen, assistant professor of finance, College of Business, University of Nebraska-Lincoln, Lincoln, NE., and Travis Sapp, assistant professor of finance, College of Business, Iowa State University, Ames, IA.

The study concludes: "We find that investors who transact through investment professionals using conventional distribution arrangements experience substantially poorer timing performance than investors who purchase pure no-load funds. Investors in all three principal load-carrying retail share classes (A, B, and C) significantly underperform a buy-and-hold strategy. Among all load funds, Class B investors suffer from the poorest cash flow timing, underperforming a buy-and-hold strategy by 2.28 percentage points annually, compared with annual underperformance of 0.78 percentage points for investors in pure no-load funds. No-load index funds are the only funds found to show no evidence of poor investor timing."

Jeff Buckner, founder and president, Plancorp, Chesterfield, MO., said: "This study is another major blow to non-index mutual funds. It shows that investors who pay brokers for mutual fund-related investment advice and invest in traditional broker-sold mutual fund shares experience materially worse performance than investors who get no such advice. The Zero Alpha Group-sponsored study proves that investors who buy and sell mutual funds through brokers using conventional distribution arrangements experience substantially poorer timing performance than investors who purchase pure no-load funds and no-load index funds."

Mercer Bullard, study co-author, founder and president, Fund Democracy, and securities law professor, University of Mississippi School of Law, said: "Investors pay fees to brokers expecting to receive good financial advice, but mounting evidence suggests that many are worse off as a result. Investors' actual performance has long lagged the performance of mutual funds in which they invest, yet paying for advice from brokers may increase rather than decrease this performance gap. Perhaps brokers shouldn't always be expected to put you in the fund with the best investment performance, but at least they should get you the returns of the fund they put you in."

Thomas A. Muldowney, managing director, portfolio director and financial advisor, Savant Capital Management, Inc., Rockford, IL., said: "On top of paying higher sales fees than they would with no-load index funds, investors in load share classes also sacrifice considerable performance due to bad timing. Overall, trading based on recent highs and lows in returns is costly to fund investors, who would do well to heed the advice 'buy and hold.' Investment professionals ought to be aware of the pitfalls of market timing and therefore less susceptible to its false allure. Accordingly, investors who purchase shares through such professionals reasonably might expect to experience less -- rather than more - timing underperformance than other shareholders without access to such professional advice through conventional distribution arrangements."

Bryan Taylor, chairman and founder, Plan B Wealth Management, Perth, Western Australia, said: "This study reminds us that the investment selling industry is fundamentally flawed and cannot be considered to be truly advice-based. Since the inception of the personal financial advice industry, it has been dominated by people and institutions who have really had the role of selling mutual funds and stocks. The evidence in Australia is the same as here in the USA. Even if the consumer is sold a good mutual fund, the result across the board is that they do not achieve even the results of the fund. Assuming that people actually want to build up assets to supply their needs in the future, this is evidence of a system that consistently fails financial consumers."

Key study findings include:

• Investors in actively managed funds suffer more than three times the annual underperformance of index fund investors; 1.70 percentage points versus 0.47 percentage points. Investors in no-load index funds experience no performance gap at all, suggesting that the smartest money is finding its way into these funds.


• Investors in load funds and legal no-load funds (funds with no load and a low 12b-1 fee) experience annual returns that lag the performance of the funds in which they invest by 1.82 percentage points and 1.91 percentage points, respectively. Among all load funds, Class B investors suffer from the poorest cash flow timing, underperforming a buy-and-hold strategy by 2.28 percentage points annually. In comparison, investors in pure no-load funds (funds with no commission and no 12b-1 fee) experience an annual performance gap of 0.78 percentage points, representing an economically and statistically significant difference.

ABOUT ZAG

Founded in 1995, the Zero Alpha Group (http://www.zeroalphagroup.com) is an international network of independent investment advisory firms that manage a total of more than $7 billion in assets. The nine current members of the Zero Alpha Group -- including Plancorp, Savant Capital Management and Plan B Wealth Management -- are committed to providing objective, long-term private wealth management solutions to investors, focusing on asset allocation and a structured, quantitative approach to investing. The firms in the Zero Alpha Group network share a common philosophy about investing and client service - a commitment to passive, tax-managed investment strategies while providing an independent financial planning solution for investors.

The four previous mutual fund-related studies released by ZAG addressed the hidden trading costs of mutual funds (January 2004); an expanded and updated look at hidden mutual fund trading costs (November 2004); the "survivor bias" in mutual fund ratings (March 2006); and the index fund "broker penalty" ( November 2006).

CONTACT:   Patrick Mitchell, (703) 276-3266 or .

EDITOR'S NOTE: A streaming audio replay of this news event will be available on the Web at http://www.zeroalphagroup.com as of 5 p.m. ET on December 6, 2007.