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Feb 13, 2008 4:25 pm

Just wanted to see how many of you do business with Principal Funds.

Feb 13, 2008 8:29 pm

use to, was a Principal rep awhile back.  they sucked then big time.  not sure about current situation.  don’t use them anymore.

Feb 14, 2008 3:34 pm


Just wanted to see how many of you do business with Principal Funds.


  I would imagine only those at work at Principal Financial.. I have never even heard of the funds before.. (maybe that is just me) Don't have any dealings with Principal as a competitor.   Miss J
Feb 14, 2008 4:07 pm

Thanks, i am looking to start a career as a wholesaler and this is one of the shops i am looking at.   Wanted to see how many of you FA’s do business with them.  I would be on the Bank side of the business.

Feb 14, 2008 4:24 pm

Never heard of them…

Feb 14, 2008 4:53 pm

Cash - they don’t have a great reputation although their funds have gotten better in recent years.

This is Morningstar’s take on the fund family:

American Funds:

Franklin Templeton:

Van Kampen


These days it’s about can the fund family do it all, and can you support the troops? For some reason us bank brokers are obsessed w/ American Funds, a VA or two, & sometimes our propreitary fund family. Where were you before looking into this?

Feb 14, 2008 5:20 pm

Don’t do biz with them, but they are part of AXA which is one of the world’s largest Insurance companies. They have some very good funds, and with that behemoth behind it you think they could do a better job of marketing themselves. Hartford and Allianz have shown these insurance companies can do well in the investing world and AXA is larger than both.

Here’s Morningstar ratings for Prinicpal:

  Key Stats Asset Class Score % of Assets  Domestic Stock 3.2 ---  International Stock 4.0 ---  Municipal Bond 1.9 ---  Taxable Bond 3.7 ---
Average Expense Ratio % Domestic Stock 1.37 Average International Stock 1.62 Average Municipal Bond 1.24 Above Avg Taxable Bond 1.05 Average
Total Assets($mil)*   Min Investment 74,689   $0
Load (% of Assets)   No Load (% of Assets) 37.6   62.4
Feb 14, 2008 7:44 pm

I use their High Yield and Diversified International funds - both quite good.  It helps that my local wholesaler is one of the best - he keeps me updated with both good news & bad (I’d rather hear bad news from him than a client) and helps me when I need it with client appreciation events.

Feb 15, 2008 9:20 am

Those are expensive funds. More advisors should invest client funds in ETFs and index funds and raise the advisor fee. The advisor is really where the value is added, not the fund company.

Feb 15, 2008 10:30 am

Yeah, no real need for positive Alpha in investing.  I think I’ll stop using American Funds and switch completely to an ETF portfolio. 

  However, you're right that those are relatively expensive funds.  Not the worst I've seen, but not the best either.   
Feb 15, 2008 11:35 am

They are expensive and i would not look at anything they offer except for MAYBE the fixed income stuff-if I used funds for fixed income.  They are everywhere here in the Midwest as they are based in Des Moines, Iowa and have a huge presence in the business retirement plan market.  They are just an overall bad fund family.  The only “perk” of working so close to them was direct contact with the fund manager.  Got to listen to his/her reasoning for poor performance and how they were going in a “new direction” each year.

Feb 15, 2008 3:58 pm

over 90% of “Alpha” is associated with asset allocation and not stock selection

Feb 15, 2008 5:38 pm

JJ - are you sure? Are you thinking that one should compare oneself always to the S&P 500? Institutions typically(and investors should) compare themselves to their blended benchmark. Alpha is an individual fund to its benchmark stat. Please see below:


1. A measure of performance on a risk-adjusted basis. Alpha takes the volatility (price risk) of a mutual fund and compares its risk-adjusted performance to a benchmark index. The excess return of the fund relative to the return of the benchmark index is a fund’s alpha.

2. The abnormal rate of return on a security or portfolio in excess of what would be predicted by an equilibrium model like the capital asset pricing model (CAPM).

1. Alpha is one of five technical risk ratios; the others are beta, standard deviation, R-squared, and the Sharpe ratio. These are all statistical measurements used in modern portfolio theory (MPT). All of these indicators are intended to help investors determine the risk-reward profile of a mutual fund. Simply stated, alpha is often considered to represent the value that a portfolio manager adds to or subtracts from a fund’s return.

A positive alpha of 1.0 means the fund has outperformed its benchmark index by 1%. Correspondingly, a similar negative alpha would indicate an underperformance of 1%.

2. If a CAPM analysis estimates that a portfolio should earn 10% based on the risk of the portfolio but the portfolio actually earns 15%, the portfolio’s alpha would be 5%. This 5% is the excess return over what was predicted in the CAPM model.


Feb 15, 2008 6:31 pm

it’s true–92% of return is based on which asset classes you own—not which “great pick” that you own within each asset class.

Feb 15, 2008 6:35 pm

forgot to mention this is from Ibbotson study of 91 pension funds over  a 10 year period. published in 2001.

Feb 15, 2008 6:56 pm

newnew - that’s true - asset allocation largely determines what returns you will get, but that’s not what alpha is. Alpha is the abnormal rate of return on a security or portfolio in excess of what would be predicted by an equilibrium model like the capital asset pricing model (CAPM). So it’s the index plus or in the case of negative alpha - the index less the portfolio manager’s input. So, while asset allocation generates 92% of the returns, alpha points to the other the other 8%. This includes market timing, security selection, etc.

Feb 16, 2008 8:30 pm

Actually Principal has one of the few (only?) open ended mutual funds
that is a  preferred stock portfolio (PPSAX).  Overall
performance is poor, but consider the asset class… YTD performance
is nice as there has been a buying opportunity.  A good option if
you can use them in a fee based account, wouldn’t want to build a whole
portfolio with their funds.

Feb 17, 2008 7:59 pm

I have a friend who is a wholesaler there.  Send me a private message if you want his phone number.