Best-Performing Managers Played it Safe in 2008
Mutual fund managers Tom Forester and David Ellison stood out from the crowd last year with the two best-performing funds, even though they both lost money in 2008.
The Forester Value Fund, the best-performing U.S. domestic equity fund in 2008, was down 0.82% for the year, thanks to investments in stocks that typically do well during recessions, including Kraft Foods, Johnson & Johnson and H.J. Heinz. The average decline for the year in the value fund category was 38%, according to Morningstar.
Ellison's FBR Small Cap Financial Fund was second among financial sector funds, losing just 10% of its value, compared to an average decline of 45% in its category.
Ellison's fund is invested primarily in low-risk small banks and in cash. He said he plans to keep it there until the economy starts to show broader signs of recovery.
"I'll probably be in some of the same stocks for the first six months or so of 2009," Forester told the Associated Press. "And then as I see things getting better, I'm going to shift out of the real defensive things, and get more constructive on the more cyclical stocks that can grow quite well as we come out of this period. I think unaffordable mortgages are still going to chew on the economy for a while."
Three Big Mutual Funds Bleed 60% in 2008
Legg Mason heavyweight manager Bill Miller, who once beat the Standard & Poor's 500 Index 15 years in a row, has gone from best fund manager to worst, with his Legg Mason Opportunity Trust fund down a staggering 65% for the year.
According to Morningstar, the second-worst performer was the Winslow Green Growth Fund, down 61%, followed by the Legg Mason Growth Trust Fund, down 60%.
"[Miller] continued to try to position the fund for a recovery," Morningstar Analyst Greg Carlson told The Wall Street Journal, adding that Miller kept holding on to Amazon (down 45%), Expedia (down 74%) and Yahoo (down 48%) as well as Freddie Mac and American International Group.
Winslow manager Jack Robinson said the fund's losses were due to its concentrated portfolio and focus on green energy companies. "We also made a couple of mistakes," Robinson said. "We stayed with some companies that had sound fundamentals but which had debt. We're going to be sticking with our investment philosophy for the long term."
Cox's Legacy Seen As Sorely Tarnished
Talk about leaving with an impression. The likely legacy of Securities and Exchange Commission Chairman Christopher Cox, when he steps down this year after taking on the position in 2005, is likely to be that of ineffectiveness during the worst economic period since the Great Depression, The Wall Street Journal reports.
More than ever, it is likely the SEC will be merged with the Commodities Futures Trading Commission. In 2008, all of the major investment banks ceased to exist due to their outsized exposure to subprime mortgage-linked securities, precipitating the current economic crisis. And Bernard Madoff was found to have scammed $50 billion from investors over a period of decades despite repeated warnings to the SEC.
"Cox had the greatest perception of inactivity in the face of this crisis," said Professor Jay Brown. "People wanted the SEC to be this outspoken proponent of investor protection, reinvigorate its mission and let people know that the SEC was on top of this. [Instead,] it has been one inadequacy after another; it looks like the SEC was asleep at the switch."
Cox assured investors only days before Bear Stearns collapsed that it had adequate capital levels, and was reportedly absent for emergency conference calls the weekend before Bear went bankrupt.
Lynn Turner, formerly chief accountant at the SEC, said Cox is "the worst" chairman ever due to his failure to protect investors.
Standard Chartered Settles Timing Suit in Hong Kong
Standard Chartered Bank's Hong Kong division has agreed to reimburse $320,000 to 1,000 investors who were allegedly disadvantaged by the firm's permitting Stone Castle, a Millennium Partners subsidiary, to market time 24 mutual funds managed by ACM Funds and Scudder Global Opportunities Funds.
Standard Chartered reached the settlement with the Hong Kong Securities and Futures Commission without admitting to guilt. The Commission said Standard Chartered gave Stone Castle same-day pricing.
"The SFC considers that the timing advantage given to Stone Castle was open to abuse and was potentially prejudicial to Standard Chartered Bank's other clients because it might enable Stone Castle to trade ahead of those clients at better prices," the Commission said.
T. Rowe Price Launches Strategic Income Fund
T. Rowe Price has launched the Strategic Income Fund, a new offering that will invest in 12 asset classes to achieve high income and some asset growth, with 80% or more of its assets invested in income-producing securities.
Available through no-load and adviser shares, the fund will invest up to 65% of its assets in non-investment-grade securities and up to 50% in non-U.S. foreign debt securities denominated in dollars.
Specifically, the fund's investments will include U.S. and international corporate bonds, high-yield bonds, asset- and mortgage-backed securities, emerging market debt, convertible bonds, preferred stock and government debt.
Steve Huber will be the lead portfolio manager, along with Mike Conelius, Andrew McCormick, Mike McGonigle and David Stanley. Prior to joining T. Rowe in 2006, Huber was the chief investment officer for the State Retirement and Pension System of Maryland.
"With a flexible investment program, the Strategic Income Fund's exposure to a variety of debt instruments helps to moderate the risks of investing in high-yield bonds and foreign securities," Huber said. "While the fund invests without borders and focuses on securities with higher risk/reward potential, it tempers that risk by maintaining a significant exposure to investment-grade securities that aim to preserve capital."
Morningstar's Top Awards Go to Royce, Artisan, FPA
Managers of funds at Royce, Artisan and First Pacific Advisors took the three highest honors in Morningstar's annual Fund Manager of the Year Award, for domestic stock, international stock and fixed income, respectively.
Charlie Dreifus, manager of the Royce Special Equity Fund, is this year's domestic stock fund Manager of the Year. David Samra and Daniel O'Keefe of the Artisan International Value Fund are this year's international stock fund Managers of the Year. And Bob Rodriguez and Tom Atteberry of the FPA New Income Fund are the fixed income fund Managers of the Year.
"When selecting our Fund Managers of the year," said Russ Kinnel, director of mutual fund research at Morningstar, "we look for superior long- and short-term performance, proven strategies executed by experienced teams rather than trend-chasing, and strong stewardship. 2008 was such a challenging year for fund investors and managers. We have seen how crucial it is for managers to be able to successfully limit investors' losses."
For the year, the Royce fund was down 19.6%, the Artisan fund lost 30.1%, and the FPA fund rose 4.3%.
Hedge Funds Projected To Lose 18% in 2008
Hedge funds lost an average of 18.4% in 2008, according to early projections by the Hennessee Group. However, given that the Standard & Poor's 500 Index declined 37% in 2008, hedge funds "significantly outperformed equity benchmarks on a relative basis," said Hennessee Managing Principal Lee Hennessee.
(c) 2009 Money Management Executive and SourceMedia, Inc. All Rights Reserved.
http://www.mmexecutive.com http://www.sourcemedia.com/
