Morningstar’s Manager Of The Year Nominees And Why You Shouldn’t Care
Every year, Morningstar makes a big deal about announcing its pick for Morningstar Manager Of The Year, which honors whomever Morningstar feels best navigated the markets. The winners are invariably well-respected stock pickers with solid track records. It is no doubt an honor to win the award.
The 2009 nominees for domestic-stock manager and fixed-income manager of the year were announced on Morningstar.com last week (sign up for a free Morningstar account):
Fixed-Income Manager Of The Year Nominees
Phil Condon and Rebecca Flinn, DWS Strategic High Yield Tax Free (SHYTX)
Farnham, Kane, Landmann, Nucci, Metropolitan West High Yield Bond (MWHYX)
Dan Fuss, Kathleen Gaffney, Matthew Eagan, Elaine Stokes, Loomis Sayles Bond (LSBRX)
Jeffrey Gundlach and Philip Barach, TCW Total Return Bond (TGLMX)
Mark Notkin, Fidelity Capital & Income (FAGIX)
Domestic-Stock Manager Of The Year Nominees
Bruce Berkowitz, Fairholme (FAIRX)
Staley Cates and Mason Hawkins, Longleaf Partners (LLPFX)
Jeff Cardon, Wasatch Small Cap Growth (WAAEX)
Dennis Delafield and Vincent Sellecchia, Delafield Fund (DEFIX)
Bill Nygren, Oakmark Select (OAKLX) and Oakmark (OAKMX)
Why You Shouldn’t Care
Shouldn’t you be paying attention to who the best fund managers are? After all, don’t you want to be in the best-performing funds? Of course you do. Thing is, you want to buy the best-performing fund before it tops the charts, not afterwards. You’ve heard it a thousand times, but it bears repeating: past performance is no guarantee of future results.
Case in point: consider the recent performance of the 2008 manager of the year winners…
Charlie Dreifus of Royce Special Equity (RYSEX) has been outperformed by 44% of his peers this year.
Bob Rodriguez and Thomas H. Atteberry of FPA New Income (FPNIX) have been outperformed by 98% of their peers this year.
David Samra and Dan O’Keefe of Artisan International Value (ARTKX) have been outperformed by 90% of their peers this year.
Obviously, not even the best managers can be expected to outperform year after year. Longer-term numbers are what matters. Still, top performers in any given year have a striking tendency to bring up the rear in subsequent years. This year’s results certainly aren’t unique. This year’s winners might not fair any better. Or the might. The point is, you can’t assume this year’s winners will do as well next year. If history is any guide, they won’t. Personally, I’d recommend sticking to Vanguard or perhaps Dimensional Fund Advisors if you invest through a financial advisor.
RSS Feed
Email
Kyle,
Thanks for pointing out what Morningstar will never tell the public!
Another great resource for making this point is Weston Wellington of Dimensional Fund Advisors. I’m not sure if you can find any of his work online as I had access to DFA’s advisor website at one point. But he collects “investment pornography” and proves why it’s so useless to listen to the financial media. He’s great for a laugh and a good lesson about ignoring all the noise!
In regards to Artisan International Value (ARTKX) your statistics are off. Smart Money shows ARTKX in the top 32% YTD. Morning Star categorizes the fund differently and shows that the fund is in the 76 percentile, and not 90th. No mater how you categorize it ARTKX beat the MSCI EAFE index by about 300 basis points which should be good enough for any fund.
Since Morning Star’s criterion includes long term components hopefully they pick good overall funds.
Although FPNIX’s terrible performance does lend credence to your story.
And maybe in some cases you SHOULD care: Nominated as co-manager of the year, (see “Jeffrey Gundlach and Philip Barach, TCW Total Return Bond (TGLMX)” above), Jeffrey Gundlach who just started Double Line LLC, is also nominated for Manager of the Decade for his funds’ performance over the last 10 Years…
My stats are not off, as I didn’t get them from Smart Money. Beating the MSCI EAFE is not even remotely impressive for a fund that invests in emerging markets, since emerging markets have almost TRIPLED the returns of the EAFE this year. EAFE is the wrong benchmark for the Artisan fund.