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Beware
of Mutual Fund Manager Changes.
I’m going
to tell you about a relatively unknown website that tracks mutual fund
manager’s comings and goings. That’s news that mutual fund investors
need to know. Here’s why.
Mutual fund
analysis is usually predicated mostly on the fund’s historical
performance statistics.
Although some
would disagree, for me, using a fund’s historical results to forecast
future performance makes sense as long as whoever is responsible for the
performance, typically the fund manager, stays on the job.
In my view, a
fund manager with a strong track record of beating the market is likely
to continue his or her winning ways. Conversely, a serial underperformer
is likely to continue to underperform. That’s why I stick with mutual
funds that have been managed by the same person for at least three
years, and preferably five.
While it’s
easy to avoid picking new funds with unseasoned managers, what happens
when a manager leaves a fund that you already own? More to the point,
how do you even know that one of your fund’s managers has left?
Keeping track
of fund manager changes is job number one at FundAlarm (www.fundalarm.com),
a free site run by investment advisor Roy Weitz. Even better,
Weitz puts the fund manager changes in perspective, weighing in with his
view as to whether the change is more likely to help or hurt the
fund’s future performance.
For each
management change, Weitz gives you the nuts and bolts—who’s leaving,
and who’s taking over, and where they came from. That’s important
information, but Weitz’s “FundAlarm Comments” are even more
helpful. That’s where Weitz gives you his take on the significance of
the change, and he doesn't beat around the bush.
For instance,
when discussing the outlook for a fund that recently replaced its
outgoing manager with two other fund managers, Weitz opined; “X and Y
are essentially untested at their own funds, let alone this one, and
they have to be considered a big question mark. If we owned this fund,
we’d be looking for an alternative.”
Weitz updates
the fund manager change listings once a month, on the first. Find them
by selecting Recent
Manager Changes on FundAlarm’s homepage. The most recent month’s
changes are listed at the top, in alphabetical order. Earlier changes
going back one year are listed below the recent changes. You can see
older manager changes going as far back as the site’s inception in
1996 by selecting the Archive
of Manager Changes at the top.
You’ll
probably enjoy scrolling through the older listings the first time that
you visit the site. I find Weitz’s gossipy tidbits interesting, even
if I’ve never owned the funds that he mentions. On future visits, you
can see the recent month’s additions by scrolling through just the top
section of the recent changes page.
Weitz’s
monthly Highlights and Commentary page, also an interesting read,
includes recent news and gossip about the mutual fund industry in
general. Get there by going back to FundAlarm’s homepage and then
selecting Highlights
& Commentary.
Weitz also
maintains lists of outperforming and underperforming funds, based on
comparisons to the appropriate index such as the S&P 500. The Honor
Role shows the outperformers, and the 3-Alarm
page lists the underperformers. The worst underperformers are also
shown on the “Most
Alarming 3-Alarm Funds” page. All are accessible from links on
FundAlarm’s homepage.
Finally,
FundAlarm’s Discussion
Board is another area worth checking out. The boards are moderated,
meaning that rude, off topic, or otherwise offensive messages don’t
get posted. With more than 25 posts on an average day, the board is
amazingly active for a relatively unknown site. However, most of the
posts come from “Ted,” described on the site as a night owl residing
in Olympia Fields, Illinois.
Ted’s
postings consist mostly of links to interesting news and commentary
about mutual funds, and investing in general. According to the site,
although officially retired, Ted has a day job coordinating the
financial content for a consortium of 72 public libraries. Ted doesn’t
fill his posts with links to stories you see everywhere. I spend all day
long on the web, but all of Ted’s links that I clicked took me to
stories and commentary that I wouldn’t have found on my own.
FundAlarm is
in many ways, a throwback to the early days of the Internet. It’s a
neat, low-key site with useful information for mutual fund investors.
There are no annoying pop-up ads, or any other kind of advertising for
that matter.
published 8/24/03 &
8/31/03 |
