(Bloomberg) -- Edward P. Owens, whose $22.4 billion Vanguard Health Care Fund has outperformed every U.S. equity mutual fund since it was created in 1984, will retire at the end of the year.
The fund returned 16 percent a year since May 1984, better than any other stock fund, according to data from Chicago-based Morningstar Inc. The Standard & Poor's 500 Index gained 11 percent annually over the same stretch.
"He has made people a ton of money," Daniel Weiner, editor of the New York-based newsletter Independent Adviser for Vanguard Investors, said in a telephone interview. "The guy is a legend."
Owens, 65, is a senior vice president and partner at Boston-based Wellington Management Company LP, which manages about $234 billion for Vanguard across 20 funds, the Valley Forge, Pennsylvania-based firm said today in a statement. Jean M. Hynes, a Wellington senior vice president and partner, will take over the fund, Vanguard said. She has worked on the fund's team for almost 20 years, and will continue to manage it in a similar style, Hynes said today in a telephone interview.
"Ed's long-term track record of excellent returns puts him in very select company in the investment management business," Vanguard CEO F. William McNabb said in the statement. Owens is Vanguard's longest-serving outside manager.
Owens, in a telephone interview, said he had an advantage over peers because he was a value investor in a growth industry.
Immunex Windfall
"During the industry's high-growth years, small disappointments created huge declines in stocks prices," he said. "We were frequently able to come in afterwards and buy good companies."
In 1993, Owens bought shares in Immunex Corp., a biotechnology firm, after the failure of one of its drugs caused the stock to plummet. Amgen Inc., a Thousand Oaks, California company, agreed to buy Immunex in 2001 for $16 billion, a deal that gave shareholders in Owens' fund an estimated gain of about $1 billion, he said.
"A billion dollars is something," Owens said.
The fund's performance declined in recent years, according to data from Morningstar. Over the past three years, it returned returned 13 percent annually, trailing 65 percent of health-care funds.
Diminishing Opportunities
Owens said as growth in the health-care business has slowed, the opportunities once available to value investors such as himself, have diminished. The fund has also been hurt by a heavy reliance on traditional drug companies and too little exposure to biotechnology, analyst Christopher Davis wrote in a November 2011 note on Morningstar's website.
The fund had 52 percent of its money in pharmaceuticals and 8.4 percent in biotech as of June 30, according to data compiled by Bloomberg. The Nasdaq Biotechnology Index gained 12 percent a year in the five years ended Aug. 31, compared with 5.2 percent for the S&P 500 Pharmaceutical Index.
The $2.3 billion Fidelity Select Health Care Portfolio returned 15 percent a year since May 1984, second-best among equity funds, Morningstar data show. The $1.2 billion FPA Capital Fund ranked third with an annual return of 14 percent.
