FundAlarm - Highlights & Commentary Archive

Highlights and Commentary

By Roy Weitz

(Originally posted August 1, 2001) [Archive Table of Contents]

Age doesn't always beget wisdom: Specialty funds are often viewed as training grounds for young managers, and manager turnover is often high.....But a surprising number of Specialty funds are run by managers who've been on the job for at least five years.....Some of these seasoned Specialty fund managers (such as Edward Owens, of Vanguard Health Care) are truly experts in their field.....Other experienced Specialty fund managers might as well be rookies, given how little they deliver for their shareholders.....The accompanying page lists 20 Specialty funds, each run by a manager with at least five years on the job, and each currently a 3-ALARM fund.....If you own one of these struggling funds, here's a good question to ask yourself: "When, exactly, is this manager going to get it right?"

During the first half of 2001, the average Specialty-Technology fund in the FundAlarm database dropped 26.5%.....From this statistic, you might conclude that the entire tech sector has been a disaster, but that's not the case.....For example, the average "online retail" stock jumped more than 90% during the first six months of this year, and the average "online information" stock increased more than 40%.....As usual, the averages disguise some spectacular gains:

"Online retail" stock (Symbol)	2001 Return (thru 6/30/01)
Priceline (PCLN)	589%
Delia's (DLIA)	469%
FTD.com (EFTD)	415%
Expedia.com (EXPE)	387%
1-800-Flowers.com (FLWS)	260%
eBay (EBAY)	108%

If you own a tech fund, it's reasonable to expect that your manager would have spotted this mini-boom in online retail stocks, and participated in it to some extent.....After all, that's what you pay for.....But don't count on it.....According to one writer, many tech managers followed the herd out of online retail stocks last year, and missed this year's run-up entirely*.....How can you tell if your tech manager was sharp enough to benefit from the surge in online retailing?.....Given the generally dismal state of fund portfolio reporting (more about that later), this kind of investigation isn't easy.....But if you can locate recent portfolio information, you should see evidence that your tech-fund manager was gradually increasing the weighting of e-tail stocks over the past few month, and some of the big names (above) should appear in the end-of-period portfolio reports for your fund.....(Of course, there's always the possibility of window dressing, but that's another story).....If your manager missed this train entirely, you might want to find out why.
* E-Tailers Are Clicking," Lewis Braham, Business Week, July 23, 2001; sector groupings and returns come from Morningstar

It looks more like a toilet to us,
but you be the judge

Several months ago, Invesco agreed to pay $120 million so that the new Denver Broncos football stadium could be called "Invesco Field at Mile High".....Many Broncos fans weren't crazy about the new corporate name and now, it seems, Invesco insiders have some doubts, too.....According to a July 1 article by Denver Post sports columnist Woody Paige, some employees at Invesco refer to Invesco Stadium as "The Diaphragm," because they say it resembles a giant birth-control device.....Invesco CEO Mark Williamson initially threatened to sue Paige over his column, claiming that Paige's assertions were "categorically untrue," and that Paige had "impugned the reputation, character and values of Invesco Funds Group and its 850 employees".....A few days later, Williamson withdrew the threat of a lawsuit.....As Williamson discovered after checking around, some folks at Invesco really do think the stadium looks like a giant birth control device.
"Invesco to sue over column," DenverPost.com, July 2, 2001

Five years ago, Michael Price sold the Mutual Series funds to Franklin Templeton, and now it's time for Michael to say goodbye.....Price will relinquish his official responsibilities at the end of October, and Peter Langerman will take over.....At about the same time, two of Price's long-time cronies (Raymond Garea and Robert Friedman) will leave the firm, and several junior people will be promoted this month.....All of these changes call for a chart:

Mutual Series fund	Current management	New management (effective August 1, 2001; continuing manager(s) in green)
Mutual Shares	Lawrence Sondike (Manager) Susan Potto (Assistant Manager)	David Winters (Co-Manager) Lawrence Sondike* (Co-Manager) Timothy Rankin (Assistant Manager) Deborah Turner (Assistant Manager)
Mutual Qualified	Raymond Garea (Manager) Jeff Diamond (Assistant Manager)	Jeff Diamond (Co-Manager) Susan Potto (Co-Manager)
Mutual Beacon	Lawrence Sondike (Co-Manager) David Winters (Co-Manager)	David Winters (Co-Manager) Matthew Haynes (Co-Manager)
Mutual Discovery	David Winters (Manager) Timothy Rankin (Assistant Manager)	David Winters (Manager) Timothy Rankin (Assistant Manager)
Mutual European	Robert Friedman (Manager) David Winters (Assistant Manager)	David Winters (Co-Manager) Matthew Haynes (Co-Manager)
Mutual Financial Services	Raymond Garea (Manager) Joshua Ross (Assistant Manager)	Raymond Garea (Manager) Joshua Ross (Assistant Manager)** Jeff Diamond (Assistant Manager)

* Sondike will eventually "transition" from day-to-day management, according to Franklin Templeton
** Garea is scheduled to leave the firm September 30, 2001
Michael Price has been phasing out of day-to-day operations for several years, but that was no problem (according to the Franklin Templeton PR machine) because Price's five hand-picked successors had been taught by the master himself.....But soon, only two of Price's clones will be left (Sondike and Langerman, who doesn't manage any funds).....So, are we still supposed to believe that nothing has changed at Mutual Series?.....In our opinion, it's a new fund company.....In terms of obvious changes, Mutual Qualified and Mutual Financial Services appear to be the biggest question marks under the new regime.....Mutual European barely missed a beat when Robert Friedman took over for David Marcus in February 2000.....Now that Friedman is leaving, it will be interesting to see if the beat goes on.

Warning! This image may haunt you for the rest of your life:

	"A couple of years ago, I almost got the Oakmark logo tattooed on my butt."
-- Robert Sanborn, former manager of the Oakmark Fund, describing his misplaced loyalty to the firm that ultimately forced him out. From an article about Sanborn's successor, Bill Nygren ("Dollar Bill"), by Richard Ten Wolde, SmartMoney, August 2001

With all the recent talk about privatizing the Social Security system, many observers assume that there's a huge windfall coming for mutual fund companies.....In fact, millions of small retirement accounts wouldn't be good news for fund companies.....Fund investors shouldn't be thrilled, either.

The problem with small accounts is that they're simply not economical for fund companies, even those that watch their pennies.....Consider, for example, Vanguard Index 500 (VFINX), where the minimum IRA investment is currently $1,000, and the fund's expense ratio is 0.18%, which means that a $1,000 investor pays $1.80 per year towards the operation of the fund.....Out of this $1.80, Vanguard must pay for the costs of drafting, printing, and mailing an annual prospectus, as well as semiannual reports and periodic account statements.....Telephone staffing is another significant expense.....Fidelity recently estimated that it costs $13 to handle each call to its service center.....Even if Vanguard is twice as efficient on the phone as Fidelity, it would still take Vanguard seven years just to recover the costs generated by a $1,000 investor who calls twice a year.

Vanguard currently deals with small investors by imposing a $10 annual "maintenance fee" for accounts under $10,000.....This fee raises the effective annual expense ratio of Vanguard 500 Index to 1.18% for a $1,000 investor -- not terrible for an actively-managed equity fund, but verging on the disgraceful for an index fund.....And we'd guess that $11.80 per year still doesn't cover Vanguard's costs for a $1,000 account.....Since Vanguard isn't a charitable institution, the money to pay for these small accounts comes from Vanguard's larger accounts -- in effect, large accounts subsidize the smaller ones.....However, since the ratio of large accounts to small accounts is probably quite stable, Vanguard has been able to work these subsidies into its overall cost structure.

What happens if the floodgates open?.....If Social Security is privatized, it's been estimated that there could be as many as 140 million new retirement accounts, each initially worth about $1,000*.....If Vanguard were to pick up even 5% of those new accounts, the number of Vanguard shareholders would increase by about 50%, from 14 million to 21 million.....And there's no way that the cost structure at Vanguard, or Fidelity, or any fund company, could absorb that many new, small accounts.....So, what will the fund companies do if Social Security is privatized?.....It seems un-American for the fund companies to refuse these new accounts, or set the initial investment minimums too high.....But it seems equally unfair to expect current investors to subsidize these new accounts.....Government subsidies are a possibility, but that would create a huge, expensive bureaucracy.....Government-run mutual funds are too horrible to contemplate.

The privatization issue is just gathering steam, and there might be some creative, workable solutions out there.....But if Social Security is eventually privatized, and mutual funds are allowed as an investment option, we have the feeling that existing fund investors will end up subsidizing those new accounts, in the form of significantly higher expenses.....If this is an issue that you care about, you might want to keep an eye on it, and let the politicians know how you feel.
*"From Progressive to Differential Pricing," Fund Democracy Insights, July 2001

Still no burgers
or diversified
growth funds

There's a lot to be said for sticking with what you do best, but that wisdom appears to be lost on the folks at the Firsthand Funds.....Tech-heavy Firsthand has filed paperwork to open five new funds.....Two of the new funds are outside the firm's area of expertise (Firsthand Healthcare and Firsthand Biotechnology), and the other three funds are me-too offerings (Firsthand Aggressive Growth, Firsthand Multi-Cap Growth, and Firsthand Capital Appreciation).....The latter three funds will no doubt be marketed as "diversified" alternatives to the firm's volatile tech funds.....More likely, however, these "diversified" funds will end up as tech-fund lookalikes.....If you're enticed by Firsthand's track record, take your Dramamine and go with their pure tech funds.....That's what they do best.....If you want a diversified growth fund , and especially a health care/biotech fund, there are better choices.

Some men dream of building empires, other men dream of yams:

	"We were the spicy mustard on the Thanksgiving table and now we want to be the other dishes, too."
-- Steven Witt, Managing Director of the Firsthand Funds, on why Firsthand is expanding its fund offerings. Quoted in TheStreet.com, July 17, 2001

Do these Firsthand guys have food on the brain, or what?

	"Executives [at Firsthand] like to refer to their offerings as the 'jalapeno on the pizza.'"
--MFWire.com, July 17, 2001

You don't need an Italian/English dictionary to figure out the meaning of the word "confusione," and that word seems like an appropriate way to introduce our discussion of the Pioneer fund family.....In May 2000, Pioneer was acquired by an Italian bank, UniCredito Italiano, even though many Pioneer execs had never even heard of their new owner until the deal was announced.....Unlike many fund-company buyers, UniCredito seems determined to get involved in Pioneer's day-to-day operations.....So far, the results have not been inspiring.....In May of this year, the Italian executive who was assigned to run the Pioneer funds in the U.S. quit to take a new job in the home country.....That left David Tripple in charge of Pioneer's U.S. fund operations, but not for long.....UniCredito decided that Theresa Hamacher, Pioneer's chief investment officer, would henceforth report to a UniCredito executive in Dublin, Ireland [!], instead of reporting to Mr. Tripple, who was down the hall.....Mr. Tripple, obviously a student of subtle business nuance, figured out that it was arrivaderci time for him, too.....On a positive note, Ms. Hamacher is reportedly learning Italian, and Pioneer's U.S. office has been provided with a top-of-the-line espresso machine.....On a more negative note, this deal has all the signs of a disaster in the making..... UniCredito has started throwing its weight around, in a market and culture it doesn't understand, and there's already been fallout at a couple of funds.....Pioneer has a few managers with decent track records (for example, John Carey at the flagship Pioneer fund), and it's hard to believe that these folks want to become a part of a centralized, international operation that's run out of Dublin, or Milan, or who-knows-where......We predict more changes at Pioneer, coming soon.
"Pioneer Group Blazes Trail After Purchase by Milan Bank," Aaron Lucchetti, The Wall Street Journal, July 9, 2001

Speaking of careers in decline, consider the case of Fred Kobrick.....In 1997, Kobrick was a well-respected manager at State Street, which he left to start his own mutual funds......Eighteen months later, seeking to "maximize" his growth opportunities, Kobrick sold out to Nvest....About a year after that (July 2000), Nvest was acquired by French bank CDC.....Last month, CDC told Fred the Maximizer that the Kobrick funds were history.....Management contracts for Kobrick's three funds (Kobrick Growth, Kobrick Emerging Growth, and Kobrick Capital) have been temporarily assigned to outside firms .....By December 1, CDC plans to merge the Kobrick funds into two new CDC funds: Kobrick Growth will become Nvest Large Cap Growth, and Kobrick Captial/Kobrick Emerging Growth will become CDC Nvest Star Growth.....Kobrick views these changes as a case of the little fund guy being crushed by the big asset-gatherers: "It's hard to be a great investor and run a company...[CDC] wanted to see profitability and growth in assets...I wanted to be a great investor.....This is more of an industry of elephants"*.....Kobrick seems to forget that he wanted to be an elephant, too, but let's ignore that for a moment.....Note that CDC isn't merging Kobrick's funds into larger, existing funds.....CDC is merely shifting Kobrick's assets into new funds that have nothing to do with Kobrick......Kobrick and CDC can spin these events all they want, and they can talk all they want about "difficult markets" and "resource issues".....When all the BS dust settles, it's clear to us that Kobrick was fired.
* Once Hot Fund Manager Kobrick's Retail Mutual Funds Fold," Frank Byrt, Dow Jones Newswires, July 2 2001

Briefly noted:

It's been a pretty boring summer month for the FundAlarm Discussion Board Model Portfolio.....The FundAlarm portfolio lost a little, the benchmark portfolio (Vanguard Total Stock Market) lost a little less, and the two portfolios are now separated by less than $1,000:

As of:	FundAlarm	Vanguard Total Stock Mkt
Feb 22	$95,900	$94,900
Mar 22	86,161	84,480
April 22	93,445	92,440
May 22	103,670	100,070
June 22	95,083	93,460
July 22	93,650	92,710

View the latest fund-by-fund results for the Discussion Board Model Portfolio
...and continued thanks to Karl for his monthly updates

If you ever meet a mutual fund executive in person, and you want to test the staying power of his or her antiperspirant, be sure to ask about fees.....The latest example of a moist mutual fund exec is John Carl, senior vice president of Alliance Capital, who was recently put on the hot seat by a reporter for The New York Times.....Why, for example, does Alliance Premier Growth earn $178 million in management fees on $17 billion in assets, while the American Funds Investment Company of America, with over three times the assets ($57 billion), earns $50 million less in advisory fees?.....According to Alliance executives, the high cost of their funds is justified by the company's research-intensive management style.....As Mr. Carl puts it, "We do try to run a profitable business. Alliance Capital should not be at the top of the expense scale; we'd never want to be at the tippy-top. But I do believe we should be above median, primarily driven by our management fees".....Well, perhaps the tippy-top of the expense scale wouldn't be so bad, if Mr. Carl could generate some itsy-bitsy better performance.....Even with its high fees and research-intensive management style, Premier Growth is a 3-ALARM fund (one class, the "A" shares, is just outside of 3-ALARM territory.....By way of comparison, American Funds Growth, with less than half the expense ratio of Alliance Premier Growth, is on our NO-ALARM list.
"After Stocks Slump, Fund Fees Cause More Pain," Patrick McGeehan, The New York Times, July 8, 2001
Alliance (above) is the firm that was recently hired to manage Vanguard U.S. Growth, which holds about $12 billion in assets.....On the first $7.5 billion in assets, Alliance will charge Vanguard a fee of "less than 0.40%," compared with the 1.0% fee that Alliance charges shareholders of its own growth fund (Alliance Premier Growth).....What's the reason for the disparity in management fees?.....According to an Alliance spokesperson, Vanguard is getting a wholesale rate because it delivered a huge amount of assets bundled into one big account.....To which we say: Nonsense.....For a manager -- as opposed to a fund administrator -- it's totally irrelevant whether the money in a fund has arrived in one big chunk, or whether it dribbles in over the years.....Managers work with blocks of money and, once money is in-house, a manager couldn't care less how it arrived.....Here's the real reason Alliance charges a higher fee to its own shareholders: Because it can.
Your apology letter is in the mail: The Turner fund family is bailing out of two ill-timed, ill-conceived funds.....Turner B2B E-Commerce (remember that concept?) will be renamed Turner New Enterprise, and it will drop the foolish B2B requirement.....Turner Wireless and Communication will merge into New Enterprise.....About a year from now, look for Turner's newest, trendy funds -- Turner Healthcare and Biotech and Turner New Energy and Power Technology -- to also bite the dust.
1. Janus and Fidelity don't want to disclose their complete mutual fund portfolios more often than current law requires, which is every six months.
2. The SEC is considering rules that would require more frequent disclosure.
3. The Investment Company Institute, the leading mutual fund trade association, recently sent a letter to the SEC that took the Janus/Fidelity position, strongly opposing more frequent disclosure of mutual fund portfolios.
4. Janus and Fidelity pay the largest dues to the Investment Company Institute (ICI).
Do we detect a pattern here?.....On the issue of more frequent portfolio disclosure, the ICI again shows that it's been bought and paid for by the large fund companies.....We assume that the SEC knows this, and treats communications from the ICI with the appropriate skepticism.....Still, the ICI letter is astonishing for its arrogance, condescension, and hypocrisy.....For people who manage mutual funds, information is like oxygen, and the ICI takes their concerns oh-so-seriously (hence all the bitching and moaning about Regulation FD).....But for investors in mutual funds, the ICI views portfolio information as a luxury, something that the great unwashed don't want and don't need.....Can you imagine the squeal from fund managers (and the ICI) if the SEC allowed publicly-traded companies to report their financial results only twice a year instead of quarterly, as they're now required to do?.....Isn't the ICI just a little bit hypocritical when it opposes quarterly fund reports for investors, and says that twice-a-year reporting is good enough?.....The ICI should be ashamed of itself for this letter.....It probably won't be.
Gary Pilgrim has stepped down as Chief Investment Officer of Pilgrim Baxter, the firm that runs the PBHG mutual funds.....Michael Sutton will take over for Pilgrim.....Sutton keeps all of his current fund responsibilities (PBHG Large Cap Growth, Large Cap 20, and Select Equity), and Pilgrim remains with his funds as well (PBHG Growth, New Opportunities, and Core Growth).....Here's our question: If managing three funds and being CIO was too much for one person (Pilgrim), why will another, less-experienced person (Sutton) be better able to pull it off?.....Could it be that Pilgrim is also setting the stage to retire as manager?
Robert Bertelson took over Fidelity Aggressive Growth from high-flying Erin Sullivan, who left in February 2000 to join a hedge fund.....So far, Bertelson's performance has been dismal -- so dismal, in fact, that Bertelson's new boss has been forced to defend him in public.....According to Abigail Johnson, Bertelson is remaining true to his fund's mandate, and he won't "become a value manager to match what's in vogue or try in some other way to time the market".....Ms. Johnson misses the point, since many investors would be satisfied if Bertelson could merely become a good growth manager.....That's not only his mandate, it's right there in the name of his fund.
"Spotlight on Fidelity manager as a top fund tumbles," Beth Healy, Boston.com, July 11, 2001
Royce & Associates, which runs the Royce family of mutual funds, has been purchased by Legg Mason.....Royce will become a wholly-owned subsidiary of Legg Mason, and the current Royce management team will continue in place under "long-term" (probably five-year) employment contracts.....It will take up to five years for Royce execs to receive their full payout, which is based on future firm revenues.....Surprisingly, the structure of the deal gives the Royce team little incentive to grow the assets of their funds, and that's good news for current fund investors.

Janus managers have always been a good source for slightly pretentious and vaguely indecipherable comments to the press.....Now, with a new generation of Janus managers coming on board, it's nice to know that the tradition continues..... Here's what John Schreiber, manager of Janus 2, recently had to say about stock picking at Janus:

"Our growth stock competency is better suited to a market with a recognizable trend than to a short-term trading market...We're capable of heroic stock-picking, but it takes more than that to deliver positive returns in these conditions."

If you read this carefully, Schreiber seems to be saying that Janus managers are momentum investors, who require a heavy dose of luck to succeed.....Ouch.....Maybe Schreiber isn't ready to meet the press, after all.
"Getting to the bottom of Janus's downturn," Charles Jaffe, boston.com, July 15, 2001

Several months ago, we pointed out that some brokers push "B" shares on their mutual fund clients, even though the clients might be better off with "A" shares.....Last month, Prudential instructed its brokers to limit sales of "B" shares to clients who invest $100,000 or less in a single fund.....Prudential brokers can still sell "B" shares to larger investors, but the burden will be on the broker (and, presumably, the broker's supervisor) to show that a "B" share transaction "is economically in the best interest of the client."
"Prudential Limits the Sales of Brokers' B-Share Funds," Aaron Lucchetti, The Wall Street Journal, July 17, 2001
Honest, boss. I was working: Sandy Rufenacht, manager of Janus High-Yield, "has been known to interview massage therapists about a casino's business while getting a back rub."
"Tinker, tailor, soldier, money manager," Rick Miller, Investment News, July 16, 2001
More Stupid Manager Tricks:
- Rufenacht (above), tries to "gauge the economy and check savings rates" by digging through trash bins at automatic teller machines to check the balances on discarded receipts.
- A manager at MFS ate nothing but Wow! potato chips and water for a full day to see if the fat substitute Olestra really does cause digestive distress.
- One fund company, fortunately unnamed, employed an attractive female analyst "who would hang around the bars after technology conferences to wheedle company information from tipsy executives."
From the same Investment News article, above.
Prior to 1998, Merrill Lynch Growth looked more like a value fund.....Then, it became a true growth fund, and soon it will become a dead fund.....If shareholders approve (and why wouldn't they?), ML Growth will be merged this fall into Merrill Lynch Fundamental Growth.....Manager Stephen Silverman never brought much excitement to this fund, which mostly seemed to exist so that Merrill Lynch could claim to have an offering in the upper right-hand corner of the style box (i.e., large-cap growth).....Now that ML has added a few other growth-oriented, large-cap funds, this shrinking fund has become expendable, and survivorship bias will once again be allowed to work its magic.....A couple of years from now, when Merrill wants to strut its growth-stock skills, the dismal record of ML Growth will conveniently be gone and -- voilà! -- Merrill might even look like it has some ability as a growth-stock investor.
Nepotism alert: Mark Oelschlager, son of James Oelschlager, has been appointed lead manager of the Live Oak Health Sciences Fund.....The junior Oelschlager does have some credentials to be a fund manager, other than a long last name that begins with "O".....But without Dad in charge, we doubt that junior would be in charge, either.
For those who believe that fund manager changes don't really matter, consider this: Two weeks after David Felman resigned as manager of Fidelity Mid Cap Stock, new manager Beso Sikharulidze had already cranked up the fund's technology exposure from 4.5% to 22% of fund assets.....Sikharulidze's call may prove to be brilliant, or not.....But either way, if you bought this fund under Felman, it's now a very different animal.
"When Heads Roll, Strategies Often Follow," Ian McDonald, TheStreet.com, July 19, 2001
If you've been wondering why Strong High-Yield Municipal Bond Fund has been performing so poorly of late, it's got a lot to do with the 9% of its portfolio that was recently in default.....If this sounds like Heartland deja vu, it is, although the situation at Strong isn't nearly as dire.....Here's what really scares us: Manager Mary-Kay Bourbulas says that "the worst is over."
"Strong Capital Fund Suffers Muni Blues," Karen Damato, The Wall Street Journal, July 3, 2001
There's something wrong with this picture: Michael Murphy runs a biotech mutual fund (Monterey Murphy Biotechnology) that consistently ranks as one of the ugliest of all 3-ALARM Specialty-Health funds in the FundAlarm database.....Murphy also publishes a biotech newsletter, which costs $2,295 per year (yes, that's two thousand two hundred ninety five dollars).....Murphy's obnoxious e-mail promotions for the newsletter tease about the "8 little-known biotech firms that are going to...become the richest companies on the planet," and Murphy boasts that his average biotech trade, including losses, has generated "a 70% profit in just over 4 months".....What's so astonishing about Murphy is that almost every piece of publicly available evidence suggests that he's a failure as an investor.....Yet folks presumably continue to buy his newsletter, based on wild and totally unsubstantiated claims about a private trading record.....Want more evidence of his incompetence?.....Murphy publishes another newsletter, which contains a "Med-Tech" Model Portfolio.....From 1995 through 2000, Murphy's model portfolio has posted a 5% average annualized return, compared to a 15% return for the Wilshire 5000 benchmark*.
* "P.T. Barnum and the SEC, Paul B. Farrell, CBS. MarketWatch.com, July 11, 2001

Here's the first paragraph of a recent Boston Globe article:

	"There is a painting of a powdered jelly doughnut on the wall of a small private dining room at Putnam Investments. The work is said to be a favorite of Lawrence Lasser, the firm's chief executive."
--Boston.com, July 19, 2001

Citizen Kane had his Rosebud, and Marcel Proust had his madeleines.....Could it be that Lasser has some kind of obsession with deep-fried snack cakes?.....Sometimes, you just wish a story provided more details

According to a pair of recent academic studies, the average load equity fund performs slightly worse than the average no-load fund, yet the average investor in a load fund earns a higher return.....What accounts for this seeming anomaly?.....Load-fund investors appear to hold their funds longer, perhaps because their broker talks them out of selling, or perhaps because they don't want to admit that paying a load for an underperforming fund was a waste of money....Whatever the reason, load-fund investors tend to have a higher average exposure to equities.....Over the long run, this additional exposure outweighs the underperformance of load funds.....Of course, there's also a lesson here for the no-load investor: Simply by buying a diversified portfolio of no-load funds, you're ahead of the average load investor.....If you can resist the urge to time the market, and you can keep from moving in and out of equity funds, you're likely to outperform load-fund investors by an even wider margin.
"Do Funds Charge Investors for Negative Value?", Mark Hulbert, The New York Times, July 8, 2001
From mid-April through mid-July, the Nasdaq Composite index rallied 9.3%, while the average Janus stock fund dropped 1.9%.....For folks who post on the "Janus Junction" discussion Board, at Morningstar.com, that was apparently the last straw.....Around the 8th of July, the Board degenerated into some bizarre nastiness, with our favorite attacks being directed at someone called "OpenTurdler".....Morningstar actually shut the Board down for a day, and recently things have been a bit more civil.....But Janus Junction posters still apparently have a lot of issues they need to work out.
"The Conversation Turns Testy at Janus Junction," Chet Currier, Bloomberg.com, July 20, 2000
Meyers Pride Value just turned five years old and, in its first month of eligibility, it earned a spot on the FundAlarm Honor Roll.....But things may be changing at Meyers Pride, which seeks out companies that oppose discrimination based on sexual orientation.....The fund has been acquired by the Citizens funds, and Meyers Pride will be renamed Citizens Value.....Shelly Meyers will remain as manager, but a number of companies that made it through her social screen (for example, Texaco) probably won't make it through the multiple screens used by Citizens.....Citizens benefits, because it gets a good value fund to go with its so-so growth fund (Citizens Core Growth Standard (WAIDX)).....Shareholders of Meyers Pride may not be as fortunate.
"Citizens buys Meyers fund to expand out of growth realm," Justin Wiser, CBS.MarketWatch.com, July 11, 2001
Nobody bothered to tell us, but July was apparently designated Write About Tom Marsico Month.....Three different articles in three major publications (The Wall Street Journal, Money, The New York Times) each covered basically the same ground.....In June 2000, Bank of America agreed to purchase Marsico's money management firm for $950 million, which represented a huge premium based on the assets that Marsico's firm had under management.....Marsico firm assets have since dropped from about $16 billion to $14 billion, and his high-profile mutual funds (Marsico Focus, Marsico Growth and Income) have hit the skids.....Bank of America, of course, is still publicly tickled pink that it owns the Marsico shop, and everyone (especially Marsico) is confident that Marsico hasn't lost the magic touch.....One interesting note, which didn't seem to surface at the time of the buyout: Bank of America doesn't have an employment contract with Marsico, which means that Marsico could theoretically retire tomorrow.....(Did the Bank at least remember to get a non-compete agreement? Who knows.).....According to a Bank spokesperson, there are some "business incentives" for Marsico to stick around, but neither the Bank nor Marsico will say what those are, which leaves fund shareholders completely in the dark.....So, what else is new?