Basing the awards on superior risk-adjusted results and shareholder stewardship, Morningstar has named its Fund Managers of the Decade, bestowing the honors on PIMCO’s Bill Gross, Fairholme’s Bruce Berkowitz and Oakmark’s David Herro, respectively, for fixed income, domestic equity and international equity.

Karen Dolan, director of mutual fund analysis for Morningstar, noted, “The 2000s saw many booms and busts. Bond markets were subdued, and equities ended the decade nearly flat. Our Fund Managers of the Decade showcased superior investing acumen and the ability to stay the course. These managers got ahead by preserving capital on the downside and believing in their research when it pointed to good value.”

Morningstar said Gross, manager of the $192 billion PIMCO Total Return, the largest mutual fund in existence, “made many prescient calls on interest rates, bond sectors and currencies, and nailed the housing bubble." The fund’s 10-year annualized total return is 7.7%. By comparison, its peers returned an average of 5.5% a year over the past decade.

Berkowitz, manager of the Fairholme fund since its inception in 1999, has unrivaled stock-picking aptitude for companies with high free cash flow, Morningstar said. The fund earned a 13.2% 10-year annualized total return, beating the S&P 500 by 14 percentage points.

Herro, manager of the Oakmark International Small Cap fund, which achieved a 10% annualized return for the past decade, successfully found “stocks trading well below their value,” Dolan said. “His portfolios don’t look anything like the benchmark and are often spiced up with a healthy dose of emerging markets exposure.”

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