Industry experts say that managers of some struggling funds should be given the benefit of the doubt, even if their sector is booming and they're seemingly stuck.
"We're very patient with a manager that's underperforming if there's a credible reason," said Harold Evensky of Evensky & Katz, a financial advisory firm.
"No matter how good the manager is they're not going to be perfect all the time. We need to look beyond the numbers," Evensky told MarketWatch.
Jim Bruyette, a financial advisor with Sullivan, Bruyette, Speros & Blayney says it's important to consider why a fund has been underperforming. Manager changes, strategy changes and poor stock selection are the three popular reasons for a fund's poor performance, known as the three P's: people, process, and philosophy.
"If they seem to be picking poor stocks, that's a possible grounds for firing," Bruyette said. "But if they pass the three P's test then nothing has changed, generally we're going to give a longer leash."
Managers who are slow to ride a sector's upswing, experts say, might better weather a sector's downswing.
But patience has its limitations, Evensky added.
"If they do not give us an answer that's credible, then we're gone," Evensky said. "We give a good manager time. We give a manager who is not doing what he said he was going to do no time."
The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.