David put in a good word for Aston/RiverRoad Independent Value in January's commentary despite their relatively poor 2012 performance and almost 50% in cash. Just looking at the top 25 holdings of this fund according to Morningstar, I see that only 13 out of 25 (52%) had a positive 2012 return. Compare that to some of the other funds on David's small cap list:
Aston/RiverRoad 13 winners out of 25 52%
Huber 25 winners out of 25 100%
Mairs & Power 22 winners 88%
Vulcan 20 winners 80%
Pinnacle 22 winners 88%
So it's not just the large cash position that's hurting this fund, but also the performance of the stocks that are already in the portfolio.
Comments
I haven't gone back to check, but I also recall that the manager of ARIVX prefers steady, predictable companies. He likely shies away from the financial sector which has proven to be risky and volatile. Of course that can lead to missing some pretty big rallies.
For us as mutual fund investors, I think the only question you need to ask yourself is do you prefer a manager/strategy that could potentially exclude a company because they do not like the sector as a whole (or other such reasons), or if you prefer a fund that will invest wherever the best value might be (but which, like FAIRX, can spectacularly fail or underperform during some periods). Of course you can also hold both.
I hold ARIVX and while it's performance this year has obviously not been amazing, it has performed "as expected" meaning good downside protection, and reasonable upside given it's exposure. I don't see the need to change funds unless they stop performing as expected or my investment plan changes.