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January 13, 2010 |
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Morningstar’s Fund Managers Of The Decade |
For many investors, the “goose egg” decade of the ‘00s was just that––a great big goose egg, billed as the worst decade ever for U.S. stocks. So when Morningstar named its fund managers of the decade, one wonders if that’s a grand accolade or just an exercise in relativism.
But there's more to investing than just U.S. stocks, and the Chicago-based investment research company’s list of top managers in the fixed income, domestic equity and foreign equity classes deserve recognition for rising above the muck of mediocrity that defined much of the investing landscape of the century’s first decade.
Bill Gross of the PIMCO Total Return fund was named top fixed income manager. The fund’s ten-year annualized return was 7.7% versus the category average of 5.5%.
According to Morningstar, no other fund manager made more money for people during the decade than Gross. Specifically, the fund’s aggregate return made on dollars invested in the fund was $47 billion. Not a bad trick, considering it was already a large fund with $32 billion in assets in 2000, and became a massive fund with more than $200 million by decade’s end.
Morningstar said that Gross managed to make the right calls at the right time in areas such mortgage-backed bonds, yield-curve bets, and plays on emerging markets and corporate bonds.
Top honors in the domestic equity category went to Bruce Berkowitz, manager of the Fairholme fund. This large value-oriented fund focuses on companies with ample cash flows and has profited from contrarian bets. For example, in 2007 the fund was nearly 35% in energy, but it cashed out in early 2008 when the masses were still piling into the sector before it crashed.
The Fairholme fund’s 10-year annualized return of 13.2% smoked the category average of 0.01%.
David Herro was lauded as the top fund manager in the foreign equity category for his work with two funds––Oakmark International and Oakmark International Small Cap. Morningstar describes Herro as eclectic and contrarian, and says his funds are “relatively compact and normally look quite unlike their relevant benchmarks and peers.”
The Oakmark International fund, for instance, plowed a chunk of money into luxury goods companies in 2008 when most others were fleeing the consumer discretionary sector.
However, Herro and his co-managers’ value strategy sometimes backfires, such as in 2007 when both funds finished in the cellars of their respective categories.
But over the course of the decade, the Oakmark International fund’s annualized return of 8.2% trumped the category average of 3.2%, while the Oakmark International Small Cap fund’s return of 10.1% beat the category average of 6.1%.
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Dorothy 
