Which observations should I use for my panel data analysis?

You have your primary independent variable (location), but you also have very significant secondary independent variables: overall market performance, fund objective, fund size, etc. Comparing a growth fund to a stable value fund would produce wildly different results in an up year than a down year. That said, I can see two ways of doing this.

The first is to restrict your data to certain years. If I were doing this, I would select three years, one where the market was very good, one where it was very bad and one where it was flat or in line with the average market performance over many years. Then I would group the funds into similar size and objective groups, look at all funds that were in existence at that time, had at least X years of history behind them and met a certain size threshold. (Alternatively, you could make size another independent variable).

The second (and I think better) way would be normalize the performance of all funds to the market. For each fund type, compare them to a standard market index (say the SP500) and then group as above. Then you could use all years. If you do this, I would also make the market index an independent variable in your analysis.