The Morningstar
500
is not quite a recommendation
list, but it’s close. I aim to help you track existing
investments and find good new ones. I scour the fund
universe for great funds, but I also include some
merely adequate funds that are widely held. I look for
funds with strong fundamentals such as low costs,
strong management, and sound strategies.
Many managers in the Morningstar
500
invest more
than
$1
million in their funds—the highest reporting
range required by the
SEC
. However, not all do.
So, I was curious to see whether Morningstar
500
managers with more than
$1
million invested out-
performed the rest of the Morningstar
500
.
In fact, they did. Looking at the list we published in
October
2006
, we found a success rate of
67%
through June
2014
. Success rates are calculated
by asking what percentage of funds survived and
outperformed over the ensuing period. It’s a way to
account for funds that perform poorly and are
merged away.
Meanwhile, the funds where managers had less than
$1
million invested produced a success rate of
60%
over that same time period. So choosing Morningstar
500
funds with managers having more than
$1
million
invested helped, though not dramatically.
From another perspective, combining the Morningstar
500
and manager investments over
$1
million signifi-
cantly increases your chances of success. The
success rate for all funds extant during that period is
well below
50%
because many of them did not
survive. Going from about
40%
success to
67%
is
truly moving the needle.
Where to Find Manager Ownership
The
SEC
requires that fund companies report manager
ownership annually in these ranges:
$0
,
$1
–
$10
,
000
,
$10
,
001
–
$50
,
000
,
$50
,
001
–
$100
,
000
,
$100
,
001
–
$500
,
000
,
$500
,
001
–
$1
million, and more than
$1
million. The data can be found in a fund’s Statement
of Additional Information.
You can also find the top level of manager ownership
on
mfi.morningstar.com
. Go to the FundInvestor
500
tab, select a Morningstar Category, and scroll over to
the Manager Ownership column. You can also see
the data on the Fund Spy tab when you select Spy
Selector and enter a ticker.
Important Changes in Manager Ownership
Because ownership is reported in ranges rather than
shares or a specific dollar amount, a manager essen-
tially has to move his ownership level by two bands
for you to be certain he has actually made a transac-
tion in fund shares. However, since the markets rose
sharply last year, it’s highly unlikely that any decrease
in ownership is simply attributable to depreciation.
I haven’t seen a lot of managers sell their funds, so it
does seem significant when they do. Here are a few:
Mario Gabelli isn’t hurting for cash. As
CEO
of
GAMCO Investors
GBL
, he hauled in
$85
million
in
2013
. Yet he also pared his holdings in
Gabelli Asset
GABAX
from more than
$1
million
It Pays to Find Managers
Who Invest With You
Fund Reports
4
Calamos Market Neutral
Dodge & Cox Income
Harding Loevner Int’l Equity
Janus Balanced
Morningstar Research
8
The People Behind
Target-Date Funds
The Contrarian
10
Being Logical and Detached
Always Trumps Being Emotional
Red Flags
11
3 Popular Funds Merit
More Scrutiny
Market Overview
12
Leaders & Laggards
13
Manager Changes and News
14
Portfolio Matters
16
Should You Add Longevity
Protection to Your Plan?
Tracking Morningstar
18
Analyst Ratings
Income Strategist
20
Funds With Big Yields Are
Tempting but Treacherous
FundInvestor 500
22
FundInvestor 500 Spotlight
23
Follow Russ on Twitter
@RussKinnel
RusselKinnel,
Director of FundResearch and Editor
FundInvestor
August 2014
Vol. 22 No. 12
Research and recommendatio s for the s riou fund investo
SM
Continued on Page 2
