essays pieces of the puzzle
Tuesday, April 26th, 2011
analyst-run funds

Recently, Karen Dolan of Morningstar did a piece on analyst-run mutual funds at some of the biggest asset management firms.  Given that I’d had experience with one of these in the past, I thought it’d be a perfect topic for me to cover.  So, I did a chart that went back to the time period for which all of the funds were in existence, showing the total returns of each.

For perspective, the S&P 500 was up 182% over this time.  Therefore, four of the funds lagged significantly behind that index, including the three that had returns basically on top of one another.  The winner, Janus Research (JAMRX), looks like something that probably doesn’t show too well on a risk-adjusted basis.  If you’re going to grab it, you’d better hope you’re at the bottom of a mountain rather than the top.

In any case, the Morningstar article makes it clear that my long-term chart doesn’t really tell much of a story about analyst-run funds at all.  Each of the funds changed in a meaningful way over this period of time — either the framework for using the analysts’ picks was adjusted markedly or the fund had been run by a portfolio manager for most of the period and the performance record can’t be attributed to the analysts.  Unfortunately, this is too often the case in the mutual fund world, where fund mergers and mandate changes limit or eliminate the conclusions that can be drawn from historical analysis.

So it is what it is:  A chart of five funds from leading firms, none of which looks very good for one reason or another.

I will take the topic and run with it, however, in essays about analyst funds that will appear on the research puzzle shortly.  [They are now posted:  the analysts get their turn and wagging the dog.]  (Chart:  Bloomberg terminal.)