3
Morningstar FundInvestor
July 2
014
from Mutual Series. The pair had done a fine
job at that fund, particularly in
2008
when a bearish
move into cash was a lifesaver.
It makes for a good lab test because Lahr and Gudefin
were losing Mutual Series’ seasoned staff of
analysts but gaining greater macroeconomic insights
through
PIMCO
. Which is more important for the
success of an equity fund? The results say stock
analysts are more important.
Lahr mentioned being warned away from Greece
as an example of how
PIMCO
’s macro insights were
helping, but their former fund has done far better
since they bolted in
2010
. In fact, Mutual Series has a
record of maintaining good performance even after
managers leave. I think that’s partly due to its stable
of seasoned analysts and the strength of its strategy.
In any case,
PIMCO
EqS Pathfinder has struggled and
Lahr recently departed. In addition, Neel Kashkari,
the architect of the equity move, has left to run for
governor of California. This is not the start
PIMCO
wanted to make in equities.
Winner:
Mutual Global Discovery has returned
10
.
2%
compared with
6
.
9%
for
PIMCO
EqS Pathfinder.
Fairholme
FAIRX
vs. GoodHaven
GOODX
Like the
IVA
and Champlain managers, GoodHaven’s
managers vowed to close their funds sooner than
their prior fund. However, because Larry Pitkowsky
and Keith Trauner were more assistant managers
than lead managers, they haven’t come close to
attracting enough assets to get to their targeted
closing level. After all, Fairholme has always been
mostly a Bruce Berkowitz production. Still, Good-
Haven is an intriguing fund.
Not only do Pitkowsky and Trauner vow to close
sooner but they also say they will tread much
more cautiously on financials—the sector that briefly
plunged Fairholme into a brutal
32%
loss in
2011
.
Thus, GoodHaven’s launch in April
2011
was a double-
edged sword. On the one hand, it trounced Fair-
holme right away. On the other, Fairholme’s pratfall
tarnished the appeal of another Fairholmesque fund.
GoodHaven started strong. In
2013
and so far in
2014
,
though, it has fared much worse than Fairholme.
This is partly because hefty inflows on a small asset
base led to big cash weightings heading into the
mega stock rally in
2013
.
Winner:
GoodHaven may be slowing, but it still wins
this bout
13
.
2%
to
10
.
8%
annualized since May
2011
.
More recently, though, number-two holding Walter
Investment Management has hurt GoodHaven’s
returns. We rate Fairholme a Silver to Goodhaven’s
Bronze because Berkowitz has a long and brilliant
record that trumps the strong but brief run of Trauner
and Pitkowsky.
Final Thoughts
The more-seasoned manager won most of these
bouts. Even though the rest of an organization is
important, it is worth it to consider following a great
manager to his new job. I love it when they intro-
duce more discipline with regard to closing, too, as
it shows a commitment to shareholders. When
they also offer a lower expense ratio, like Akre, it’s
even better.
In general, the strategies are similar enough to
produce similar levels of risk. But the big difference
in returns show how important people and asset
size are.
œ
Fund
Morningstar
Analyst
Rating
Prospectus
Net Expense
Ratio %
Inception
Date
Return %
05/01/10
to
05/31/14
Mutual Global Dsc TEDIX
•
1.28 11/1/96
11.07
PIMCO EqS Path PTHDX
‰
1.24 4/14/10 8.43
Fund
Morningstar
Analyst
Rating
Prospectus
Net Expense
Ratio %
Inception
Date
Return %
05/01/11
to
05/31/14
Fairholme FAIRX
•
1.02 12/29/99 10.77
GoodHaven GOODX
´
1.10 4/8/11
13.18
