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First of all, you have been wearing very pretty ties recently. But my compliment, although sincerely offered, is not the purpose of this letter, so I shall proceed to the substance at once....
So just exactly what is a "star manager", and do we agree with Jack Bogle that they are to be avoided?
To paraphrase Bogle, a star manager is "lionised in the press", bragged on in advertising. His past record is held up for admiration and as evidence that he has a special ability to beat the market.
To be a true star manager, I believe the manager's name must be known outside of the circle of those who follow mutual funds closely.
A corollary is that they are often managing a vast amount of money.
So has Charlie Dreifus become a start manager? Personally, I believe he may be on the cusp of stardom, but that there is still a chance for him to sink back into the relative anonymity that we would much prefer. Two big mitigating factors:
1. his oldest fund is closed at $3.4B.
2. His style, which emphasizes capital preservation, is not the stuff that generally wins the adulation of the masses.
2. His style, which emphasizes capital preservation, is not the stuff that generally wins the adulation of the masses.
Which style is "in" today? Which tomorrow? Who is a star manager today? Who is a star manager tomorrow? Meh.
When Cramer was on "Live with Regis and Kathy" talking about how Heebner was his "#1 pick for mutual fund manager" (which ignored the fact that most of the people in said audience probably could not stand the volatility of Heebner's fund) I knew that was probably it for Heebner's star status for the time being (and sure enough...)
Janus Overseas was huge for a while. It's basically been a complete and total cluster-f for the last few years, with some of its largest holdings being absolutely ridiculous mistakes.
There have been others, there will be others.
As for Royce starting 50 funds and gathering assets, nothing new. They're asset gathers, like so many other fund companies.
There are not that many mutual fund managers I'm impressed with.
He belongs to Royce.....he will never be a star. I find it humorous that they are now closing funds at almost the same blistering pace that they opened theme urging that 2-3 year stretch a few years ago.
He could have been a star manager under the "old" Royce. But when Royce sold out to Legg Mason, its all been about AUM. Even the "old" Royce played fast and loose at times -- benchmarking funds with up to 30% international exposure to the same-old US small cap indices, letting everyone know (belatedly) that star manager Whitney George had actually not really been managing x number of funds, and that the new manager was really doing Whitney's job all along (thus, you shouldn't panic folks, the new manager isn't so new, but we weren't misleading you !).
And Royce's customer service has always been very poor. They mess up asset transfers all the time, no matter how explicit your instructions, and their 1-800 reps have a had time describing how one offering differs from another (but maybe they don't know; maybe no one at Royce knows...).
Next up on the bait and switch routine...Buz Zaino, after a great year for RYPNX, will be managing 3 new funds (but not really, probably William Hench will, but we'll only find that out years later).
My wife and I have been slowly divesting from Royce over the past few years. They are a shadow of their former selves and promise. I no longer consider them a true fiduciary, no matter how cuddly Chuck Royce's cashmere sweaters looks, no matter how folksy and homespun their award-winning shareholder materials are.
I actually recall seeing a few interviews with Dreifus from the earlier days. He always struck me as a patient, modest, bona-fide accounting nerd who enjoyed finding bargains and putting money to work in a frugal, prudent manner. Wonder how he likes having to do the Royce road show, getting pulled away from the steady, yoeman work he used to do to be a cash cow for a greedy parent company. I wonder if he would invest in his own company's stock if he was a dispassionate, outside investor.
I went and pulled out my copy of Jack Bogle's "Common Sense on Mutual Funds" to see what he actually says about "star managers". He makes a distinction between the true star managers and those who only shine brightly for a few years at most.
Of the former category, he mentions 3 by name: John Neff, Peter Lynch, and Michael Price. Investing with these true stars is not really a cautionary tale; Bogle's observation being simply that there was no reliable way to identify them early in their careers.
The "stars" Bogle warns against are those who have a hot record for a year or two and are likely to crash or leave the fund altogether. Of course, that really doesn't apply to Charlie Dreifus.
Of course, the cautionary tale regarding the long term stars, which Bogle mentions, is Bill Miller at Legg Mason Value Trust. I was attracted to the fund during its streak, but avoided it due to high fees. The high fees saved me, although they were unrelated to the collapse.
Sorry you don't like my blog, Ted. Try to be a little more gentle next time.
Comments
To paraphrase Bogle, a star manager is "lionised in the press", bragged on in advertising. His past record is held up for admiration and as evidence that he has a special ability to beat the market.
To be a true star manager, I believe the manager's name must be known outside of the circle of those who follow mutual funds closely.
A corollary is that they are often managing a vast amount of money.
So has Charlie Dreifus become a start manager? Personally, I believe he may be on the cusp of stardom, but that there is still a chance for him to sink back into the relative anonymity that we would much prefer. Two big mitigating factors:
1. his oldest fund is closed at $3.4B.
2. His style, which emphasizes capital preservation, is not the stuff that generally wins the adulation of the masses.
Your thoughts, dear fellow mutual fund observers?
Regards,
Ted
When Cramer was on "Live with Regis and Kathy" talking about how Heebner was his "#1 pick for mutual fund manager" (which ignored the fact that most of the people in said audience probably could not stand the volatility of Heebner's fund) I knew that was probably it for Heebner's star status for the time being (and sure enough...)
Janus Overseas was huge for a while. It's basically been a complete and total cluster-f for the last few years, with some of its largest holdings being absolutely ridiculous mistakes.
There have been others, there will be others.
As for Royce starting 50 funds and gathering assets, nothing new. They're asset gathers, like so many other fund companies.
There are not that many mutual fund managers I'm impressed with.
And Royce's customer service has always been very poor. They mess up asset transfers all the time, no matter how explicit your instructions, and their 1-800 reps have a had time describing how one offering differs from another (but maybe they don't know; maybe no one at Royce knows...).
Next up on the bait and switch routine...Buz Zaino, after a great year for RYPNX, will be managing 3 new funds (but not really, probably William Hench will, but we'll only find that out years later).
My wife and I have been slowly divesting from Royce over the past few years. They are a shadow of their former selves and promise. I no longer consider them a true fiduciary, no matter how cuddly Chuck Royce's cashmere sweaters looks, no matter how folksy and homespun their award-winning shareholder materials are.
I actually recall seeing a few interviews with Dreifus from the earlier days. He always struck me as a patient, modest, bona-fide accounting nerd who enjoyed finding bargains and putting money to work in a frugal, prudent manner. Wonder how he likes having to do the Royce road show, getting pulled away from the steady, yoeman work he used to do to be a cash cow for a greedy parent company. I wonder if he would invest in his own company's stock if he was a dispassionate, outside investor.
Of the former category, he mentions 3 by name: John Neff, Peter Lynch, and Michael Price. Investing with these true stars is not really a cautionary tale; Bogle's observation being simply that there was no reliable way to identify them early in their careers.
The "stars" Bogle warns against are those who have a hot record for a year or two and are likely to crash or leave the fund altogether. Of course, that really doesn't apply to Charlie Dreifus.
Of course, the cautionary tale regarding the long term stars, which Bogle mentions, is Bill Miller at Legg Mason Value Trust. I was attracted to the fund during its streak, but avoided it due to high fees. The high fees saved me, although they were unrelated to the collapse.
Sorry you don't like my blog, Ted. Try to be a little more gentle next time.
Regards,
Ted
We are not enemies, but friends. We must not be enemies. Though passion may have strained, it must not break our bonds of affection.
dryflower