Mutual Funds
Play the Name Game
What's in a name? Maybe plenty if a mutual fund is named after the person who's managing it.
By Joan Goldwasser, Senior Reporter, Kiplinger's Personal Finance
March 17, 2003
We compared self-named stock funds with the rest of the funds in the stock universe and found that, in general, expenses and portfolio turnover are lower. Lower fees, of course, mean less of a drag on total returns and more money in your pocket -- or at least a smaller negative return in down markets.
As a group, funds named after their managers have outperformed the overall stock market over the past three, five and ten years, too.
"I have more freedom to do investments the way they should be done," says John Thompson, manager of Thompson Plumb Growth. But at larger firms, managers come and go as an investment styles go in and out of favor. On average, managers who run their own funds stick around about 11 years, more than 2.5 times the average tenure for managers of other stock funds.
We drop the names of five funds below. Three focus on large companies -- a growth fund, balanced fund and value fund. The other two concentrate on small companies, one invests for growth the other looks for smart values. We wanted to mix it up because, as Robert Torray, manager of the Torray fund puts it, "If the majority of investors are loaded on one side of the boat, it is bound to capsize."
Mr. Bigs
Mario Gabelli oversees 11 funds at Gabelli Asset Management, the oldest of which is Gabelli Asset (GABAX), launched in 1986. For this "All-cap" growth fund, Gabelli looks for companies that he believes are underpriced relative to their private market value (the price an investor would pay for the company) and selects those with improving fundamentals. He holds a substantial number of media and telecom stocks in the 389-stock portfolio.
Over the past 15 years it has returned an average of 11.7%, about one percentage point better than the Standard & Poor's 500-stock index. Turnover is a miniscule 9%, and the expense ratio is 1.36%. Minimum initial investment is $1,000.
The portfolio of Thompson Plumb Growth (CINF) are the largest positions.
The large-cap balanced fun ranked in the top 10% of its category for the past three, five and ten years and lost money for the first time last year. It carries an expense ratio of 1.2% and a turnover rate of 62%. Minimum initial investment is $1,000.
Although Torray (TORYX) fund is only 12 years old, Robert Torray has been managing money for 30 years. Torray describes his investment philosophy as "investing in large growing businesses that have done well in the past and seem likely to do so in the future." During its inception, the Torray fund has increased an average 13.9% annually, while the S&P 500 climbed 10.6%.
Over the past 10 years, the fund outperformed the average large-cap value fund by five percentage points annually. The fund has an expense ratio of 1.07% and a turnover of only 37%. The minimum initial investment is $10,000.
Mr. Smalls
All of the Charles Royce's funds including Pennsylvania Mutual (SSD).
Over the past 20 years, Pennsylvania Mutual has returned 11.5% annually, compared with the 8.9% return of the Russell 2000. Its expense ratio is tiny, only 0.99%, and its turnover is 39%. Premier has gained over 10% annually for the past ten years, also outdoing the Russell 2000. Its expense ratio is 1.2% and its turnover is a paltry 41%. The initial investment for either fund is $2,000.
Ron Baron uses "bottom up" research to find profitable, long-term growth companies at attractive prices for his Baron Growth (BGRFX) fund.
Baron Growth invests in smaller companies and is less concentrated. Choicepoint (CPS), which provides identification and credential verification services is the funds' largest holding.
Baron Growth has outperformed both the S&P 500 and its benchmark, the Russell 2000 index, since its 1995 inception. You need $1,000 to open an account. Its expense ratio is 1.36 and its turnover ratio is 34%.