A new rankings system for mutual funds has elevated lesser-known portfolio managers ahead of bond guru Bill Gross and legendary stock picker Mario Gabelli, The Wall Street Journal reports.
The new system, called "The Ranking Service," is unique in that it is one of the first to measure individual portfolio managers rather than the performance of their funds. It covers 3,341 managers. This could be a valuable new tool for investors trying to determine which funds they want use for their retirement savings.
Traditional ratings agencies such as Morningstar and Lipper calculate the historical performance of funds based on total annualized returns over a three-, five- or 10-year period. But that could lure an investor to buying a fund long after its star manager has departed. Conversely, many investors may overlook a fund with a poor track record but a potentially bright future due to the recent hiring of a top-notch manager.
The Ranking Service employs a methodology that calculates a score for each fund skipper based on annual rates of return of all the funds they have managed over the past five years, relative to the broader market categories in which they operate. This enables it to keep tabs on a manger when he or she switches funds. It also calculates the performance of all the fund portfolios they manage, not just the biggest or most well-known fund.
James Lowell, a private investment strategist, is the brains behind the operation, having spent three years creating the service. His rankings cost $379 a year for quarterly reports and $579 a year for daily reports. The reports have been on sale since Dec. 1 at his Web site www.trsreports.com.
A surprising result of his research is that Gross, who runs the $77 billion PIMCO Total Return Fund, ranks 1,845th in the survey. That's because it factors in the returns of 61 portfolios Gross manages including different funds and share classes where his performance compared to the overall bond market has been unimpressive.
Meanwhile, Gabelli, manager of the five-star Gabelli Equity-Income Fund, is ranked 2,854th in the Rankings Service. Although his Equity-Income Fund has ranked in the top 15% of funds in its category for the past five years, his other funds have underperformed.
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.