2
Funds that work well for investors are those with
more consistent performance, consistent manage-
ment, and consistent strategies. You’ll find them
more often at strong fund companies where manager
turnover is low and a shareholder orientation is
embedded throughout the firm’s values. Often funds
with more-moderate risk profiles are easier to use,
too. Boring allocation funds are good bets to produce
solid investor returns. Low-cost funds are able to
more consistently outperform, and their managers
often take on less risk because they have a lower
hurdle to overcome.
The Top Investor Returns
You don’t see this too often.
Yacktman Focused
YAFFX
produced a strong
8
.
85%
annualized
15
-year
return for the period ended June
30
,
2013
. Yet the
typical investor earned a
14
.
12%
return. However, the
fund was tiny during both bear markets. It ended
2008
with just $
65
million in assets. That surged to
$
666
million the next year and kept growing to $
10
billion today. Not only did most shareholders miss
those bear markets but they also missed the fund’s
bottom-decile performances in
2004
and
2005
.
Now that the fund is quite big, it won’t have such luck
in the future. However, it has produced strong risk-
adjusted performance and, despite a sluggish
2012
, it
has done well even as assets have grown. I doubt
it will be at the top of this list in five or
10
years, but
it may well be ahead of most of its peers. Indeed,
Yacktman Fund
YACKX
, which didn’t have as much
timing fortune, still produced a strong
11
.
6%
investor
return. It was launched earlier, so its start date wasn’t
a big help on the investor-returns front, though the
flow pattern was similar.
Vanguard Energy
VGENX
has long been a big fund,
yet its shareholders have returns about
100
basis
points above the fund’s already big
11
.
61%
annualized
total return. Key to that story is that the fund closed
amid the huge rally in energy stocks from
2003
to
2007
. As a result, most of the shareholders were there
for most of the huge four- to five-year run in which
returns ranged between
19
.
7%
and
44
.
6%
each year.
They couldn’t come in late. The fund has been mostly
in redemptions even after it reopened. That’s a pretty
good thing because
2009
was the only really good
year in the past five. Like Yacktman Focused, this fund
also held up much better than its peers in
2008
so
that more shareholders were around for the rebound.
Look for funds with a history of closing and you’ll
be on the right path.
Matthews Asian Growth & Income
MACSX
share-
holders didn’t make as much as the fund’s
15
-year
total returns, but because total returns were
14
.
7%
annualized, they could spare a little. The fund holds
promise for solid future investor returns, too, as it mod-
erates the extremes of emerging-markets risk while
still providing the potential for hefty returns—not that
I’d be counting on
15%
annualized the next
15
years.
Wasatch Core Growth
WGROX
produced strong
investor returns simply by having above-average
returns with below-average risks. Well, kind of. The
fund’s
15
-year returns were bettered by the typical
investor’s
11
.
2%
annualized returns. While modest
risk is part of it, the fund also presented an unu-
sual case in which it had few shareholders in each
of the past two bear markets. For the
2000
–
02
bear market, it was a tiny fund that held up much
better than most small-growth funds. Wasatch’s
focus on actual earnings rather than clicks and hype
made it one of the few growth shops to come out
of that market with an enhanced reputation.
Thus, in
2003
the money poured in. In fact, the fund
took in more than $
1
billion that year and really hasn’t
had meaningful inflows in any year since. That same
caution that helped in the bear market held it back in
the rally even though it had positive returns. That
led investors to bail on the fund just as the next bear
market hit. This time the fund didn’t even hold up par-
ticularly well on the downside but instead rebounded
very strongly in the rally.
Royce Special Equity
RYSEX
is just the sort of de-
fensive fund I’d expect on this list. Charlie Dreifus
is a stickler for clean balance sheets, and that makes
for a defensive portfolio. The fund has a
9
.
9%
15
-year
total return and
11
.
2%
investor return. The fund has
closed to new investors when assets have grown too
15 Years of Funds and Investors
Continued From Cover
