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Saturday, March 2nd, 2013

13 0302 artisans

Once a month, David Snowball releases an edition of the Mutual Fund Observer.  It is required reading for those interested in the mutual fund world and the business and process of investing.

Snowball’s regular job is as a professor at Augustana College.  (No, not the one I flunked out of — the one in Rock Island, Illinois.)  Each issue he writes is packed full of great information, including the March edition, released yesterday.  It includes a look at the performance of fund introductions from organizations that (unlike many firms) only rarely introduce new offerings, a statement from FPA on the implications of the “grand experiment” being conducted by the Fed, a look at Morningstar’s new ratings system, and much more.

One of the main topics is the decision by Artisan Partners to go public.  Snowball’s eclectic angles on it include research on fund-family performance of managers that are public versus those that are private, performance of a manager’s stock versus the funds it manages, and a three-way comparison between Artisan, Janus, and the Cheesecake Factory (!).

For the chart above, I took the largest Artisan funds and compared them to their respective benchmarks since the inception of the most recent of the four (ARTKX) in 2002.  As I stress repeatedly in my writings, performance can more often distort rather than enlighten the selection process.  But looking at it in many different ways can help to illustrate what has happened in a variety of environments — and whether the manager really does what it says it will do and whether it adds value (and subtracts it too) in ways you would expect.  That goes for individual funds and organizations.

Looking strictly at the performance, this is a good bunch.  Perhaps it’s a bit of a circular argument, in that the best performers are likely to attract assets and therefore the largest funds tend to be the better ones, at least for a time.  I did not look past these four.

You can find more information about Artisan on its website, including PDFs on the philosophy and process of each investment team.  Will the managers at Artisan be judged to be artisans in the future?  That’s the big question, especially since the organization will be subject to new pressures when it goes public.

As for Snowball, he is an artisan of the analysis of and commentary on a mutual fund world that faces a great many challenges today.  (Chart:  Bloomberg terminal.)

I was away for a time.  Here are a few readings that I found to be of interest upon my return.