Sunday, August 10, 2008

In this market, Barron's top 100 tells the story

Barron's lead story this week, "America's Best Fund Managers", highlights the difficulties of managing in the recent equity markets. While not soothing to the pocketbook, perusing the results of this select group of mutual fund managers is at least a little relief to the ego.

Using a proprietary model in conjunction with Value Line, the ranking takes into account performance over current, one year, three year and five year periods, performance relative to benchmarks for funds with similar goals, and the volatility of performance, among other variables. This top 100 is winnowed down from an analysis of 1008 mutual funds with at least $200 million in assets each, many much more than that. The top four managers all had impressive results across the board. But look at the recent results for some of these other superbly ranked stars of the investment community.
---the #5 ranking went to a manager with negative 6% performance year to date, and one year performance of negative 4%.
---the #6 ranker had negative 8% ytd performance and one year performance of negative 16%
---the #11 ranking went to a negative 15% ytd and negative 20% for one year
---#12, ytd negative 12%, one year flat
---#22, ytd down 15%, one year down 12%
---#30, ytd down 23%, one year down 19%

Go below the top 30 and these types of negative results for recent periods become the norm, and these are the top performers. Absolute performance is not, of course, what they are measured on, relative performance is their metric. For everyone else, however, absolute performance is what catches our attention. Looking from this perspective, the majority of these top 100 didn't come close to dodging the market's bullet. Sobering isn't it, or maybe not.

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