After we ceased publishing Louis Rukeyser’s Mutual Funds, many of the publication’s former subscribers said that they missed “The Rukeyser 100,” which was a listing of the top-performing mutual funds that used to appear in each issue of that newsletter. As a result of their feedback, we’ve decided to revive this listing as an online-only quarterly feature called “The Shepherd 100,” which is available at the website for Benjamin Shepherd’s Wall Street.

Although we may have changed the name of this feature, we still employ the same time-tested methodology that we used to produce this listing in the past. And while our former Louis Rukeyser’s Mutual Funds subscribers may be familiar with the criteria that we use to construct this listing, we thought it would be helpful to explain our approach to those of you who are not already familiar with this feature.

First, we screen out funds that require minimum initial investments greater than $10,000. We also remove any funds that aren’t available to investors nationwide. While these two criteria may exclude some solid funds, high investment minimums aren’t practical for many investors, and we want our national subscriber base to have access to all of the funds in our listing.

Next, we look for seasoned fund managers who have helmed a fund for at least three years. While management tenure provides some insight into a fund manager’s experience, it doesn’t preclude the possibility of a spectacular flameout—even top fund managers such as Legg Mason’s Bill Miller occasionally disappoint investors. 

New fund managers face the challenge of successfully executing an investment strategy while learning how to cope with a fund’s inflows and outflows.

That can be an expensive education for the fund’s shareholders, so it’s best to let a new fund manager learn the trade on someone else’s dime. The only exception to our three-year minimum for manager tenure is when a fund manager has prior experience running a fund with a similar strategy. 

Fund expenses are another important consideration, as high annual expense ratios can be a significant drag on performance. And investors who select funds that carry sales loads are at an immediate disadvantage in their effort to beat the market. That’s why we exclude any funds with front-end loads or deferred-loads in excess of 3 percent. In fact, the majority of the funds listed in “The Shepherd 100” do not carry sales loads.

Finally, we rank funds based on three-year performance, with the best-performing funds appearing at the top of their category.

“The Shepherd 100” is arranged into five broad categories: Growth, Growth & Income, Specialty, Taxable Income and Tax-Free Income. Each category is further divided into a number of subcategories that encompass most of the investment styles of the overall mutual fund universe. 

The one category our methodology excludes is alternative funds. These are funds that employ leveraged or inverse strategies or trade more exotic instruments, such as commodities and volatility futures. Many of these funds impose high fees or simply haven’t existed long enough to produce sufficient performance data.