Two days ago - to my sadness and delight - I had learned via MFO that Eric Cinnamond, one of my all-time favorite managers with ARIVX/ICMAX was back in the mutual funds world with Palm Valley Capital Fund (PVCMX). ('Sadness' because I have missed almost 5 years of exploiting his financial acumen for a modest management fee and 'delight' because I have now been able to put a sizable investment into his new vehicle.)
This got me thinking, are there any other great/good managers who came back to manage a mutual fund or an ETF after being away for some time in the last, say, 20 years that I might be missing on?
(No knock on Bill Nygren, who's done an admirable job at the Oakmark Fund (OAKMX), but I am still hoping for the day that Robert Sanborn comes back with a publicly available investment offering.)
Comments
A lot depends on what qualifies as "left and came back." There are relatively few managers who liquidated their funds and took a sabbatical. Michael Fasciano comes to mind, but his second act was short.
If you think, instead, about managers who left a behemoth, waiting out their non-compete agreements then launched, the list is ... well, about half of the funds we're profiled. Seafarer, GQG, Grandeur Peak, Rondure, Prospector, Poplar Forest, Centerstone, Bretton, Moerus, Seven Canyons, and Towpath are all the products of star managers turned entrepreneurs. One of the reasons that we tracked manager changes and funds in registration so assiduously for years was to track to discontent and departure of first-tier managers.
David
Please don't come back with.... it's not fair to compare to the SP500.. over diversification+ using special funds is a choice.
You want to use mangers that do well on both, see PRWCX over decades.
https://schrts.co/IZkdiRPw
Thanks David - makes sense.
My main interest was along the lines of making sure I did not overlook anyone worth noting who'd left for private asset management and/or just decided to take an extended break - say, at least a year or more - but then came back for another spin-at-the-wheel.
Your example w Michael Fasciano is exactly the point: until your post and the subsequent reading of the MFO article I did not even know about the second round. Is a third coming coming - pardon the pun - else why the 2023 revision?
My own mutual fund investment decisions are ~ 75% based on the manager (historical performance, strategy, etc.), ~ 15% on asset allocation, and ~ 10% on everything else. So, as much as possible, I try to keep track when talented managers move around and follow (e.g., Robert Gardiner: Wasatch to Grandeur). It is easier to do when, as you put it, "star managers turned entrepreneur" since non-competes are typically up to a year (am I wrong?) but when it takes longer - one just drops off the screen, as was the case with Eric Cinnamond for me... Truly, I should have been reading MFO more assiduously!
I guess this leads to a natural follow up: You have cited several funds/families as products of first-tier managers leaving behemoths. But these are the funds with, often, a number of active/influential co-managers sharing in strategy development and asset picking. Also, many of these new shops have since diversified and grown into sizable hippopotamuses themselves, with founders spreading their talents thin across multiple offerings, assuming more supervisory/managerial roles, or leaving active association with fund management at their new ventures altogether (e.g., same Robert Gardiner).
So, if there aren't many examples of the Eric Cinnamond (and, perhaps, Michael Fasciano) variety: can you share who are, say, the 5 best managers still most active within those - or other - funds / fund families. I.e., what is your evaluation of the best active managers rather than of specific funds per se?
Now about Eric Cinnamond. IMO, you are short-changing him, though it could also be a matter of taste / risk tolerance. I won't bring up SP500 one way or another to articulate reasons for my appreciation of Cinnamond's management skills precisely because in the investment style he follows (and I favor): absolute return investing - comparison to indexes is simply not relevant or of much interest.
This is not to say that Cinnamond does not produce great returns in the long run. One has to look at managers' entire track record across various markets to appreciate their performance/skills. Unfortunately, I could not find information for the now liquidated ARIVX. So, for the sake of operating in the framework you have referenced - relative return investing - let me bring up this: if you look at his record at the still (barely) alive ICMAX, you will find that it returned ~ 100% over Cinnamond's tenure there (say, 2006 - 2011) while SP500 barely broke even.
We are simply in a different market right now: one less suited to Cinnamond's style and, frankly, my taste. But this too shall pass...
In general, I invest with people who've earned my trust. That generally has two components: (1) this isn't their first rodeo and (2) I've talked with them and came away impressed. As you'll note from my annual portfolio review, my typical holding period is decades.
I've written often about how I define "winning" when it comes to investing. First, winning is not "beating" anyone or anything else. You made more than me? Excellent!! The next round of drinks is on you. The market made more than me? That's nice. Second, winning for me is simple: "if the sum of your resources exceeds the sum of your needs, you've won." In that world, winning is driven by steadily accumulating resources (invest regularly and prudently, avoid losing money) and minimizing needs (my home is modest, my clothes last a long time, eating out is usually a celebration rather than a routine, in 45 years of driving I've owned one new car). Those two habits frees up a lot of brainspace for things that bring me joy.
To your "who" question: Mr. Romick, Mr. Foster, Mr. Sherman, Messrs Cinnamond and Wiggins, plus some collection of low-profile professionals at T. Rowe Price and Leuthold.
In general, Artisan is entirely a collection of stars who grew dissatisfied with their old haunts and were offered support and independence as Artisan Partners. Their misses as a firm are relatively few.
David
I invest where markets tell me.
1995-2000 US LC 100% indexes
2000-2010 Value, SC, international mainly in 3 funds FAIRX,OAKBX, SGIIX
Since 2010 mainly US LC+ PIMIX until 2018. Then mainly bond funds.
In 2009 PAUIX(Arnott) + Cinsmond looked great, 6 months after the bottom they lagged badly, I sold both and never bought again.
The idea is not to fight markets but to join them. In my world managers must be at the top 30% in the last 3-6 (maybe 9 months). If they don't I sell, I don't care why they lag. So, this easy system guarantee that my funds are at the top. I also look at risk-adjusted performance.
No self-respecting Fund Daddy would ever do this.
You need a new schtick FD!
US LC is the easiest, most common investment category, this is not a small unknown unique one.
BTW, if you have any good analysis where to invest please share it.
Hi David.
Thank you for sharing as always.
Your list of top managers largely and understandably looks like the cream of the crop from the funds in your portfolio as per most recent post. (I am less of a bond fund investor: Mr. Sherman is ‘David K. Sherman’ managing RPHYX, right?). And since I actually prefer low-profile managers, are the Leuthold and T Rowe Price people: Scott Opsal (+ m.b. Chun Wang) and Charles Shriver (+ m.b. Stefan Hubrich / Richard De Los Reyes)? Are there others at those co's I have missed?
Overall, your manager selections make perfect sense to me in all instances, but one. And I either trust these same managers with my investments (Seafarer, Grandeur, Artesian and now, Palm Valley) or would certainly consider doing so under the right circumstances, again – except for one. Oddly enough, this ‘one’ is your top fund holding: FPA Crescent (FPACX).
I used to have a position in FPACX long ago, but sold out for alternatives, because – to my eyes – this is a good example of where a fund and a manager ranking might diverge: i.e., a good fund with an average manager. Clearly, I am missing something, since you both value Mr. Romick highly and also have a better understanding of mutual fund dynamics.
You have previously mentioned that FPACX has ~ matched S&P 500 with about half the downside. That is a significant achievement and a strong relative metric when comparing funds – though not necessarily managers – as S&P 500 is unmanaged (sans relatively rare changes to the index). Also, S&P 500 is Large Cap while FPACX is MA/AL per MStar, so it does not seem to make for an entirely apples-to-apples comparison.
So, the questions I asked myself were:
1. How much value did Mr. Romick create for shareholders within the strategy where he operates: MA/AL (unless you believe FPACX is misclassified)? And
2. Are there managers within that strategy who have created significantly better long-term value so they might be called ‘great’ and, by extension, other manager – whose performance was meaningfully lesser – would be ‘average’ or below? (This also avoids the active manager vs passive index issues.)
Re 1, I looked at FPACX 10-year record on MStar – not as long as 30 years but might be sufficient to test across market conditions. There, FPACX has 10 y Alpha of 1.14, Beta of 1.14 coincidentally, max DD of -20.51%, and Sharpe ratio of 0.52 vs MStar MA/AL index w max DD -22.30% and Sharpe ratio of 0.61. This, and I could be very wrong, would seem to imply that active management of FPACX resulted in the fund fairly closely tracking the index and was able to generate a modest 1.14% excess return vs index at the cost of lower Sharpe ratio. To me, these numbers imply that active management of FPACX delivered average value for a good fund (i.e., a fund that managed to do marginally better than a well-performing index, which returns a poor manager / placeholder might implicitly or explicitly emulate).
Re 2, There are several options here, but I will use the one that has already been brought up: PRWCX. I think the comparison is fair since FPACX has spent most of the last 10 years in the same MA category as PRWCX. And it is a well-known fund not on your portfolio list, so you have – so to speak – chosen Mr. Romick’s fund management over Mr. Giroux’s. I do not believe, perhaps wrongly, that it is due to fund size as FPACX is not "small" and PRWCX has grown this "big" only in the last few years. As for active management metrics: per MStar PRWCX has 10 y Alpha of 4.55, Beta of 1.01, Sharpe ratio of 0.88, and max DD of -16.53%. That is, using a roughly similar pool of strategies and within the same timeframe, Giroux produces ~ 4x higher excess return, with better risk-return profile, lower downside if you happen to need the assets at just the wrong moment, and – depending on how you interpret data – does so in an arguably more predictable way. That sounds ‘great’ to me. So, why Mr. Romick and not Mr. Giroux?
To be honest, I was so baffled that I’d signed up for MFO Premium – one good thing to come out of this – and looked for clues there. The only thing I could find when running a comparison on MFO Premium was maxDD of -36.63% for PRWCX vs -28.83% for FPACX in 200902. Btw, things looked even grimmer @ MStar w max DD of at least -40.11% vs -30.80%, respectively, in the same timeframe. (Does MFO calculate max DD differently?) However, the time to convergence within 5% was quite short ~ 1 mo. So, does 5% extra DD over one month deprecate all other evidence that Mr. Giroux is a significantly better manager? Seemed doubtful to me. Finally, this comparison might not even be relevant as, in the words of Mr. Giroux, this was a BFS era, before Farris Shuggi […] it changed the way I managed CAF which happened in late 2009. In that sense, Mr. Giroux capabilities have undergone a (positive) qualitative change and, when comparing Mr. Giroux to Mr. Romick management skills since 2010, the superiority of the former appears to leave no doubt. So, I am still puzzled...
Of course, none of this is meant as a critique in any way – except, perhaps, of my own decision to sell out of FPACX – but I remember using similar logic to drive my own choice then and am, more than anything, trying to see what I might have missed. (Especially, since the rest of your fund manager appraisals resonate so well with my own.)
MFO Premium provides data for various timeframes.
Of course, PRWCX has been closed for many years, but there are some other things now for access to Giroux - all-equity TCAF, CA-PRCFX.
That sounds like you are market-timing, albeit on a year-scale.
For that to work, one needs, imo:
1. To either have a really good "intuitive" feel for it. I know people like that, but - unfortunately - am not one of them. Or
2. To have a strategy, which works over years. This is a bit problematic, imo, since any good strategy typically gets "discovered" and arbitraged out on the scale of years.
It sounds like you are relying on the "strategy" approach and it had worked for quite a while for you. This is great! (Though, if you've been mainly in bonds since 2018, you might have lost quite a bit in potential equity returns - but perhaps your personal circumstances warrant that.)
My personal approach is rather different. As an absolute return investor, I mainly care about how much I make on the annual bases irrespective of what the market does. So, if my manager delivers, say, 10% on average over 5-10 y w good risk/volatility metrics while some market segment goes up 50% in a particular year - I am happy for both myself and for the guy that got the 50. It takes talent as well as investment expertise superior to mine, however, to do it across different markets. This is why I put so much stock in selecting the right person to manage my investments - one who has the skills to, as you put it, "fight the market" when it goes against them and to get the superior returns when the market - inevitably - turns. Just a different approach...
Max Drawdowns at M*, MFO Premium, etc use monthly data.
My guess is that M* Chart display you looked at around 2009 had daily or weekly display that made MaxDD higher.
Wonder why the standard MaxDD calculation is not based on daily data - the differences look to be quite significant even in this one case and a refinement from monthly to daily data does not appear to be that computationally taxing?
IMO, weekly data is a good compromise after so many years of monthly data use. But vendors think they have more pressing issues.
BTW, Stock Rover (SR) uses daily data, so its MPT stats differ from most others. But it has other flaws.
Unless I am missing something, I think you are overestimating the complexity of refinement from monthly to daily. Once, monthly data is computed, all one needs to do is scan at most a month-worth of daily data around the peak/valley to find the daily result. (Unless there is a period, where monthly data does not correlate with a daily max DD because of a very quick recovery, but in this case monthly max DD data would not simply be inaccurate but outright misleading.)
Also, the above only needs to be done once: during the initial fund data processing/import. MaxDD is a very simple metric, so - once the base calculation is made - updating it on daily basis should be computationally insignificant: compare current value w stored peak/valley prices and record if necessary.