Lessons From Morningstar’s 2011 Fund Managers Of The Year

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Daily Capital’s Carla Fried contributed a piece to Seeking Alpha, detailing the announcement of Morningstar’s 2011 fund awards. She looks at the good and bad of the choices, as well what we can learn from the winning funds’ decisions over the past year.

[dropcap]T[/dropcap]he fund industry’s version of the Oscars were just handed out for 2011 by fund research firm Morningstar. And the winners are. …

  • Domestic Equity — the team that manages three separate Artisan funds: Artisan Mid Cap Value, Artisan Value and Artisan Small Cap Value
  • International Equity — Tweedy, Browne Global Value
  • Fixed Income — Fidelity New Markets Income

If you’re thinking handing out awards based on one-year performance is the height of irresponsibility, well, Morningstar wouldn’t disagree. While this year’s winners indeed had a fine showing in 2011, Morningstar explicitly looks for funds where last year’s strong performance is emblematic of a much longer history of doing right by shareholders. That’s the good news. The bad news — that pesky disclaimer about past performance not being a predictor of future performance.

Smart Doesn’t Mean Infallible

The roster of past Morningstar winners is strewn with really smart managers with stellar long-term bona-fides that nonetheless manage to throw in some stink bombs after being anointed. Some low lights: There’s Bill Gross (Fixed Income manager of the year for Pimco Total Return in 2000 and 2007, and fund manager of the decade through 2010) who had a god-awful 2011 after bailing on Treasuries. Bruce Berkowitz, manager of the Fairholme Fund, was anointed Domestic Equity fund manager of the year in 2009 and joined Gross as a fund manager of the decade for the first decade of the 21st century. But in 2011 Fairholme rode some big financial sector bets a long way down, losing 32 percent for the year, compared to the 2 percent gain for the S&P 500. That was bad enough to rank in the bottom 1 percent of similar funds.

Read the rest on Seeking Alpha.

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Carla Fried

Carla Fried is a freelance journalist who has covered just about every nook and cranny of personal finance for media including Money Magazine, The New York Times, and CBS MoneyWatch.com. Prior to launching her own reporting and writing business in 2002 she was a senior writer at Money and the managing editor of Quicken.com.

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Disclaimer. This communication and all data are for informational purposes only and do not constitute a recommendation to buy or sell securities. You should not rely on this information as the primary basis of your investment, financial, or tax planning decisions. You should consult your legal or tax professional regarding your specific situation. Third party data is obtained from sources believed to be reliable. However, PCAC cannot guarantee that data's currency, accuracy, timeliness, completeness or fitness for any particular purpose. Certain sections of this commentary may contain forward-looking statements that are based on our reasonable expectations, estimate, projections and assumptions. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties, which are difficult to predict. Past performance is not a guarantee of future return, nor is it necessarily indicative of future performance. Keep in mind investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.