Jason Zweig: The Decline and Fall Of Fund Managers Hi Bitzer,
Thank you for reading my post and for your question.
I’m sure you realize that, as a matter of personal policy, I resist divulging my specific fund positions. I believe it can do more harm than good because we all have different time horizons, life experiences, anxiety levels, investment proclivities, goals, family commitments, ages, and overall wealth. But since I introduced the fact that I’ll be scaling down my actively managed fund holdings, I feel the need to make an exception to that policy. So here goes.
Before I describe the short actively managed fund list, allow me to define the criteria that dominated my selection process. It was not a broad diversification goal or by sector selection. My primary selection criteria were to reward active managers who generated Excess Returns over a substantial timeframe. So Excess Returns and performance time were the key dimensions to shorten the field.
The Excess Returns were measured against the S&P 500 Index standard. The timeframe was the most recent 20-year period because I have owned the final candidates for from 17 to 22 years. I used the Portfolio Visualizer website as my data source.
My Final Five are provisional depending on the continuing tenure of the fund managers. Here are my Final Five with the mangers indicated:
FCNTX William Danoff since 1990
FLPSX Joel Tillinghast since 1969
VWELX Team Wellington since fund inception
VGHCX Edward Owens, Jean Hynes since 1984 and ????
DODBX Dodge and Cox Team with John Gunn leader since 1977
This is not a fully diversified portfolio. The missing pieces will be filled with passively managed Index products. The ordering is important since successful active fund managers are hard to find.
These mangers were chosen because they delivered annualized Excess Returns over the S&P 500 benchmark for the 20-year test period. They delivered these Excess Return outcomes with lower volatility as measured by each funds Standard Deviation. The correlation coefficients were not overly impressive, but they helped just a little to dampen total portfolio volatility. These managers have demonstrated more skill than luck over a very daunting investment cycle.
Earlier, I noted that this list is provisional. Several issues need further resolution. Ed Owens is mostly retired, so I’m closely monitoring Jean Hynes’ performance. She did assist Owens for 20 years or so, but it’s a different ballgame when you graduate from a secondary position to the top-dog managerial slot.
Also, the 20-year records of the balanced funds, VWELX and DODBX, are very similar. In a sense, they are on my bubble. At this juncture, eliminating one or the other is a vexing choice since both funds have served me well for 20 years. During that extended period they outdistanced the all stock S&P 500 Index with lower volatility. That’s a noteworthy accomplishment.
I recognize that these are pedestrian selections, but I’m a pedestrian sort of investor. I like plain vanilla ice crème. I get my excitement when visiting Las Vegas. Keeping things simple works best for me.
Of course, I reserve the right to be flexible as the opportunities develop over time. In the investment world, nothing is forever.
Best Wishes.
