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Seeing that fund on the list was maybe the main reason I quit looking. I mean, come on Russ. A negative average return for the last three years? No doubt John Hussman is a very intelligent person. But that does not make him a great money manager. His out-performance (big time) in 2007-08 attracted a lot of attention and assets soared from $188 million to $2.7 billion, obviously chasing performance. But the fund has lost more than 50% of its assets in the last year. For half the cost of HSTRX, investors could have been in VWINX and averaged almost 10% over three years. Even PRPFX, which has almost no active management, netted almost 5.5% annually. These three funds are different in a number of ways, but since M* lumps them together, they do make an interesting comparison.
Reply to @BobC: Yuh ... I might poke just a tiny bit at Mr. Kinnel and his list. In the promotional email for it (received this week), he touted three particularly excellent funds - based on their long-time management teams and discipline. The managers of two of those three funds (F P A Paramount, Jason Triton) resigned last spring and one of the three has fundamentally shifted its discipline. Likewise T. Rowe Price New America Growth (PRWAX), on the list though not in the promo-mail, saw a surprising, high-profile management shift in spring.
What does that tell us? First and foremost, that Mr. Kinnel did not write and likely never read the email that went out over his name. He's way too smart and way too knowledgeable about the industry to not notice defections that were a lead story at Morningstar. Second, that getting it right is no longer Morningstar's priority. The Fantastic 51 is an outdated list in an outdated article. Miraculously, we have the technology which would have permitted both to have been corrected - perhaps even with a useful bit of reflection about the consequence of touting star managers - with minimal effort. But that would have taken time, effort and some money. Apparently that was too high a cost to bear, merely for the sake of getting the facts right.
Reply to @BobC: Yes - HSTRX outperformed for a period on its modest holdings in gold (usually around 10% or less) and also a small utilities stake (in a declining rate environment). On paper, it looked more like a nice safe short-term bond fund. (My recollection is that he rarely went out more than a year on the yield curve.)
I think when funds employ a non-traditional or "unique" approach, it's much harder to understand and evaluate them than with more "plain vanilla" offerings. (Albeit: the latter camp presents problems as well.)
I think when funds employ a non-traditional or "unique" approach, it's much harder to understand and evaluate them than with more "plain vanilla" offerings.
That is so true. For many investors in this fund, the attraction was the outsized return in the last bear market. But I suspect very few of them ever bothered to read the fund prospectus and other literature that says the fund can pretty much invest in anything (no hedging) the manager thinks is appropriate and opportune. As they have learned, being right (and in his defense, really right) in 2007-08, did not mean he would be right since then. That true for any manager, but investors forget that point.
Comments
What does that tell us? First and foremost, that Mr. Kinnel did not write and likely never read the email that went out over his name. He's way too smart and way too knowledgeable about the industry to not notice defections that were a lead story at Morningstar. Second, that getting it right is no longer Morningstar's priority. The Fantastic 51 is an outdated list in an outdated article. Miraculously, we have the technology which would have permitted both to have been corrected - perhaps even with a useful bit of reflection about the consequence of touting star managers - with minimal effort. But that would have taken time, effort and some money. Apparently that was too high a cost to bear, merely for the sake of getting the facts right.
David
Regards,
Ted
Take care,
David
I think when funds employ a non-traditional or "unique" approach, it's much harder to understand and evaluate them than with more "plain vanilla" offerings. (Albeit: the latter camp presents problems as well.)
That is so true. For many investors in this fund, the attraction was the outsized return in the last bear market. But I suspect very few of them ever bothered to read the fund prospectus and other literature that says the fund can pretty much invest in anything (no hedging) the manager thinks is appropriate and opportune. As they have learned, being right (and in his defense, really right) in 2007-08, did not mean he would be right since then. That true for any manager, but investors forget that point.