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Do successful funds breed their own failure - and other stuff.

hank
edited January 2012 in Fund Discussions
Thanks MJG & Flack and all who contributed to the threads on active/passive management. This has inspired some thought about moderate-risk actively managed funds and whether they might somehow bridge the gap between the two approaches. Looking for track records dating back at least 25 years for a few such funds but "no cigar." Relatively low bandwidth here. Maybe somebody with better access might locate such data. In particular, wondering what type return OAKBX and PRWCX have generated over 25 year spans.

Anyway, stumbled across the linked article in which author attempts to prove that a fund's success eventually paves the way for its demise. I'd add: Why limit this to funds? Most investments rise as investors pile in. Some - maybe Flack and Peter Lynch - walk away at the top, bags brimming with cash, while others watch imagined fortunes dissipate in thin air. What strikes me is the longevity to which these trends can continue. Would guess that's what's troubling Bill Gross, as all his seasoned instincts tell him the bond party should be over, and yet it continues.

http://www.wikinvest.com/wiki/Herd_mentality


Comments

  • Derf
    How many funds have a run of 20+ years? 10 years ? 5 years?
    Table is alittle to much to handle !
    Have a nice weekend,
    Derf
  • catch22catch22
    Hi hank,

    Just a quick peek at Oakmark, from their website; and fund inception in 1995.

    http://www.oakmark.com/funds/single/sf_p.asp?fund_id=20

    Take care,
    Catch
  • hank
    Thanks Catch. OAKBX shows 10.59% Average Annual Return since 11/95 - about 15 years. Impressive, but that's not really a long enough time to take in all the fluctuations in the economy. Matter of fact, bonds have generally been in a bull market over those years. Also, don't like "average annual returns", which skew towards the high side. IMHO, compounded annual returns are more meaningful and always lower.
  • catch22catch22
    Hi hank,

    If I recall properly, I did simple math and the raw NAV return was 414% through yesterday. Every $1,000 invested at fund inception would be valued yesterday at $5,140.

    As to time frame, for a shorter period; meaning not 50 or 75 years, August 1982 was the beginning of the run through 2008, relative to equities. There were numerous bumps during this time frame.

    Take care,
    Catch
  • hank
    edited January 2012
    Turns out PRWCX has been around longer than OAKBX, with an inception date of 6/30/86. That makes it about 25 years old. Sports an 11% AAR over that time. Pretty impressive, but again AAR tends to distort.

    And yup, recall '82 being the turning point. Ya know, these are pretty broad expanses of time and it's no wonder it's hard to get a handle on what approach is best for a given individual. Makes board interesting though:-)

    Not sure if this link to PRWCX will work as sometimes have problems linking at TRP. Thanks Catch & good evening.

    http://www3.troweprice.com/fb2/fbkweb/snapshot.do?ticker=PRWCX



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