Hmmm ... I've been writing about individual funds, between FA and here, for just about 11 years. There are two profiles, both from FundAlarm days, the thought of which still makes me queasy. By worst the worst were the Utopia Funds, launched by a small advisor in Michigan. They had go-anywhere portfolios with remarkably low minimum initial investments and reasonable expenses. Five funds, ranked from "Income" to "Aggressive." They were based on a really successful set of separate accounts that thrived because they were small; they picked up bits and pieces of "orphan" investments that larger advisors found too small to be worth the effort. Those ranged from regional micro-cap stocks to called bonds. In practice, the funds started okay then sank into the average-to-bad range. Not "awful," but clearly "bad" when judged by their ability to maintain the targeted risk level. Then, without warning, they closed and liquidated. When I tried to contact them to ask about the decision, I got silence in return.
That was useful to me and, arguably, profitable to you because I stewed a lot about what contributed to the mistake. Part of the lack of a mutual fund record, as opposed to an SMA record and part was that the two managers executing the fund strategies were only assistants on the SMA strategy. Both of those conclusions helped me tighten the criteria for funds I've written about. That played out in the case of Auer Growth (AUERX), where the senior Mr. Auer managed his retirement account to something like a 10:1 advantage over the broad market over some ridiculously long time; the junior Mr. Auer talked him into launching the strategy as a fund. I was, I hope, clearly skeptical about it. A one-star fund with bottom 2% performance followed.
The only queasy interval was Nakoma Absolute Return, which was managed by one of the guys at the U of Wisconsin's famous securities analysis program. These guys cranked out a string of first-tier managers and ran a very successful long-short hedge fund which they eventually offered to the public as a mutual fund. I 'fesseup to the problem with the fund a long time ago (07/11) in a discussion started by Vintage Freak:

The general problem is that Mr. Pickett has been skeptical about the US market for much of the decade, has maintained about as many short as long positions (bad idea in a rising market) and has been repeatedly wrong in security selection. None of which I would have predicted. Indeed, none of which I did predict.

I've become more cautious about hedge fund conversions as a result; my experience is that those often end up as being okay funds but mostly shadows of their former selves. Why? Rekenthaler made a good argument this month: hedge fund conversions are cherry-picked and we don't know anything about the rest of the crop. A hedge fund manager might have 10 funds, nine of which smell like the beach at low tide and one of which has had (maybe, "has lucked into") eye-popping results. The existence of the nine dogs doesn't have to be disclosed so we falsely assume that the one winner is representative of the managers' skills. While that's not always the case - that is, some hedge fund conversions produce reputable mutual funds - it's something that we need to approach with skepticism.
--
I'm mostly able to sleep at night when I consider the other funds we're written about. Mostly. Some have been spectacular successes, which is nice, but I draw more comfort from the fact that most of the managers (including Mr. Cinnamond) have invested heavily in their funds and have done precisely what they said they were going to do. That is, they were disciplined and true to that discipline. Mr. Barbee (AVALX) told you he was going to stay fully invested, at all times, in the tiniest and cheapest stocks in existence. It's been clear from Day One that that's a rocket-and-crash discipline. The fund made a mint during the 2000-02 bear, dipped by 65% in the 2007-09 one, and is beating the competition by over 300 bps since. Its cumulative (i.e. compounded) advantage since launch is huge. That said, I'd never invest in it since I much prefer not to have my long-term returns punctuated by apocalypse. But I'm perfectly comfortable with what we wrote about it.
For what that's worth,
David

Ahh Dennis. One of the best contrarian indicators out there. Along with Goldman's chief prognosticators (formerly Stolper, now Kostin) I've made some good $$ fading some of his trading calls as well over the years.
Long term investors are wise to take his views w/a healthy grain of salt since he's mainly a short-term TRADER and flips in and out of positions more frequently than a gymnast on a tumbling run at the Olympics.
ZeroHedge loves tracking this guy and his various calls. Some do work out, of course.

FYI: Dennis Gartman is the man behind The Gartman Letter, a daily newsletter discussing global capital markets. For almost 30 years, The Gartman Letter has tackled the political, economic and social trends shaping the world's markets. ETF.com recently caught up with Gartman to discuss the latest developments in the financial markets.
Regards,
Ted
http://www.etf.com/sections/features-and-news/gartman-dont-buy-stocks-consider-gold?nopaging=1

Best and Worst sometimes has a lot to do with timing...when you buy a fund. For example, WASYX had a fantastic run until it ran into problems with asset bloat and big management changes. Those folks who owned it from 2007- 2013 and sold it for whatever reason probably loved it. Even with some stinker years, especially the last 3+ years, its 15-yr average return is about 8%. But this is why WHO runs an actively-managed fund is so critical, as is asset bloat and the problems it might cause.
Investors often are late to the party with funds, getting if after the big gains. Once the fund gains large numbers of assets, it may be unable to continue using its unique strategy. Certainly MFLDX is a good example of this. Spectacular numbers from inception 2008 through much of 2013 (assets ballooned from $35 million to almost $16 billion), then running of the tracks and crashing, not recovering even as assets dropped to $370 million. Here there was no management change. In hindsight, the small fund's purchase by a large fund company was likely a big mistake.
I would urge caution about labeling relatively new funds "Best". "Best" can mean different things to different investors. While I personally own SIGIX because of its manager's track record, the fund is barely 5 years old. I own it because I believe it is a good compliment to a higher-volatility index like SCHE. It may not have the best long-term total return numbers, but I am ok with that.

FYI: Fidelity Investments is returning fire in the online brokerage industry's price war. Fidelity, which lays claim to the mantle of largest online brokerage firm with its 17.9 million accounts and $1.7 trillion in total brokerage client assets, on Tuesday slashed its base online retail commissions for U.S. stock and ETF trades to $4.95.
That was a $3 per-trade reduction, or 38%, and Fidelity's first commission cut in 7 years.
Regards,
Ted
http://www.investors.com/etfs-and-funds/mutual-funds/fidelity-slashes-online-stock-etf-commission-to-4-95-a-38-cut/

Gambling is not a word I want associated with my retirement portfolio.
"Would MFO exists if everyone indexed?"....I wish someone would have forum posted me senseless years ago about the virtues of indexing. It would have made me a lot more money.
I respect your right to invest as you see fit with your money.

I agree with you. At least since the market bottom in early 2009 I have seen scant evidence MFOers have beaten a buy and hold in the Vanguard S&P 500 fund. Or for that matter come remotely close. Lots of international and emerging market investing and love for cash rich funds as well as alternative funds. The latter out of fears of another 2008.
Edit; Yes, I know it has been a relentless move up the past 8 years and 8 years may not be a long enough period to make any kind of judgement. But I know countless passive investors who are now set for life thanks to those 8 years. And isn't that what it is all about??

For the love of. ....!!!!
I agree with the both of you. Just saying keeping talking about it makes no sense. It is not making any difference. A better way to keep people from going active maybe to highlight highly index co-related "star" funds instead so people can see an index fund works as well. Need to change the "psychology" to make a difference.
All newsletters are not publishing buffets comments because they have any interest in getting people to index. M* stock would be not worth 2 cents if everyone started indexing. Every other day someone laments active management and there is an article and then every one has a link to it to get hits. No one listening to you and me.
PS - Please don't say active investing is gambling. Buffet himself is a gambler then.

The folks at T. Rowe tell me that this is there attempt to get around the fact that Mr. V. closed PRHYX and wants to keep it closed. They allow that the new fund gives potential investors unable to access Mark Vaselkiv’s fund “a very fine, but mostly comparable option."
The "new" fund is 46 months old, so the longest standard comparison period I've got is three years. Over the three years ending on 1/31, the correlation between the two funds was near-perfect at 97. HYOIX had substantially higher returns and a lower maximum drawdown, leading to higher Sharpe, Sortino and Martin ratios.
For what that's worth,
David

Gambling is not a word I want associated with my retirement portfolio.
"Would MFO exists if everyone indexed?"....I wish someone would have forum posted me senseless years ago about the virtues of indexing. It would have made me a lot more money.
I respect your right to invest as you see fit with your money.

I agree with you. At least since the market bottom in early 2009 I have seen scant evidence MFOers have beaten a buy and hold in the Vanguard S&P 500 fund. Or for that matter come remotely close. Lots of international and emerging market investing and love for cash rich funds as well as alternative funds. The latter out of fears of another 2008.
Edit; Yes, I know it has been a relentless move up the past 8 years and 8 years may not be a long enough period to make any kind of judgement. But I know countless passive investors who are now set for life thanks to those 8 years. And isn't that what it is all about??

Gambling is not a word I want associated with my retirement portfolio.
"Would MFO exists if everyone indexed?"....I wish someone would have forum posted me senseless years ago about the virtues of indexing. It would have made me a lot more money.
I respect your right to invest as you see fit with your money.

Ahhh the latest prognostication from Stopped-Clock Investment Advisors.
When the next crisis/drop comes, will anyone remember the # of years he was "wrong" in his calls? Or will they be too busy fawning over for (finally) getting it right?

The thing these kinds of essays fail to acknowledge is how short in terms of human history 100 years is.

Yes and just look at Japan's stock index it still has not gotten back to 39,000.

The thing these kinds of essays fail to acknowledge is how short in terms of human history 100 years is. And there is nothing scientific to this historical experience that one can extrapolate necessarily into the future indefinitely. All one can say is in the past hundred years, it has generally been a good idea to be bullish on U.S. stocks. Is that any proof that it will be good to be bullish for the next 100? The implicit assumption really amounts to a feeling--patriotism, a belief in American exceptionalism--not a scientifically verifiable fact. Will America continue to represent the highest level of "productivity, innovation and economic dynamism" that will drive the stock market here higher? Or are we part of a larger pattern of economic development you see historically with emerging nations? Were not Britain, Spain, Portugal once like America in previous eras in their economic dynamism until America became the dominant force in the 20th century? Perhaps the 21st century will still belong to us. Or perhaps it will belong to China or some other nation state. The answer can only be understood in retrospect.

Kinda of like the time period prior to the tech bubble of 2000. Three years later the broader index lost over 50% and NASDQ took an even bigger lost. Is this a secular bull market as often phased by Schwab?

FYI: Low-risk bond funds are a handy thing. If you are putting away money for a near-term expenditure like tuition in a couple of years or a house in three years, low-risk bond funds, along with money markets and certificates of deposit, can serve a valuable purpose.
Regards,
Ted
http://news.morningstar.com/articlenet/article.aspx?id=795074

"The bundle of hedge funds had compound annual returns of 2.2 percent in the nine years through 2016, compared with 7.1 percent for the index fund. The billionaire estimated that about 60 percent of the gains that the hedge funds produced during that period were eaten up by management fees."
Here's the arithmetic:
5.25% gross for the hedge funds.
2+20 in fees = 2% + 1.05% = 3.05% fees
5.25% - 3.05% = 2.2% net.
3.05% fees/5.25% gross is approximately 60%
If hedge fund managers underperformed the market (before fees), and index funds merely matched the market (before fees), then everyone else outperformed the market on average. That means individual investors and active mutual funds on (dollar-weighted) average beat the index funds.
This is just Sharpe's argument that you can't beat the market. In order for someone to outperform, there has to be someone who was underperforming. Fortunately, active investors had a bunch of losers they could take advantage of over the past nine years. Hedge funds.

Ha!
Good thread.
Hmmm ... worst (and definitely my bad):
Whitebox Funds ... WBMIX
Burns me to this day that they closed-up shop after what ... three years.
Cowards!
c

Nice try @Ted.
Want to throw another one up there for Lewis to swing at?
:)
I'll be honest. Up until now I've always practiced what O’Shaughnessy preaches and have striven to separate politics and macroeconomics in general from investment decision making - preferring instead to focus on relative valuation of asset classes. But it's getting harder. I'm more and more inclined to believe this time is different. ... I speak as one who has loved and followed political discourse since I was 14 years old and who was subscribing to U.S. News & World Report at that age. Read the damn thing cover to cover twice every week so as not to miss a single word. Goldwater, "Tricky Dick", LBJ and the rest. But, I've never been so concerned as now. I know I'm not alone. There's some very well educated knowledgable folks on the board. Agree with Ted's overall gist that the board is becoming too political. I'll see what I can do to help turn it in a different direction.

One can separate political views (and contributions) from investment practices. Over the past several years, what has served as a benchmark for me in measuring how much politics has swayed money managers is how loudly they decried the deficit after 2008.
For example: "With current government deficits and debt running amok expecting inflation rates to remain low is wishful thinking—indeed, given current trends, it is more likely that inflation will be significantly higher over the next ten to 20 years than it was from 1970 until now."
Running amok? Wasn't that a Star Trek episode?
That market commentary by a Mr. Jim O’Shaughnessy was dated September 2010. Things change. No reason to be concerned now about a projected $10T deficit over the next decade (just released by the CBO). Especially in an economy finally nearing full capacity.

EXTAX (Manning & Napier Tax Managed) was first suggested by board members and also favorably mentioned by Professor Snowball perhaps 8-9 years ago. ... (Apparently that fund no longer exists).

If it got your attention just 8-9 years ago, you may have wondered about the ticker. Manning & Napier funds were called Exeter funds until Sept. 26, 2006.
EXTAX was just (this month) liquidated. From the prospectus supplement:

The Board of Directors of the Manning & Napier Fund, Inc. (the “Fund”) has voted to terminate the offering of shares of the Tax Managed Series (the “Series”) ... Accordingly, ...The Series will redeem all of its outstanding shares on or about February 1, 2017

(I'm confident Shadow posted this at the time; now it was just easier to fetch the filing directly.)

EXTAX (Manning & Napier Tax Managed) was first suggested by board members and also favorably mentioned by Professor Snowball perhaps 8-9 years ago. Did very well with it averaging in over a 3-year period. Eventually sold when it no longer met my needs. Been meaning to say "Thank You" to David and the board members for that one. (Apparently that fund no longer exists).
Good thread @MikeM