(Bloomberg News) Donald Yacktman, whose Yacktman Focused Fund has won $1.5 billion in net deposits this year, is doing something rivals Bruce Berkowitz and Bill Miller aren't: making money for his clients.
Yacktman's fund beat 96 percent of peers in 2011 and at least 95 percent for the past five and 10 years, according to Morningstar Inc. Excluding small-cap managers and those with less than $200 million in assets, the only diversified U.S. stock funds to equal that mark as of Oct. 21 are his flagship Yacktman Fund, Artisan Mid Cap Value Fund, Wells Fargo Advantage Growth Fund, First Eagle U.S. Value Fund and SunAmerica Focused Dividend Strategy Portfolio.
"They may not be easy to find, but there are some top managers who can still outperform," Ronald Sugameli, chief investment officer of Weston Financial Group Inc. in Wellesley, Massachusetts, said in a telephone interview. His firm oversees $1.6 billion and invests in actively managed funds.
The six funds are still attracting customer deposits while many competitors grapple with redemptions and some of the biggest-name managers face mounting losses. Investors have pulled $349 billion from actively managed U.S. equity funds since the end of 2006, Morningstar data show, as two bear markets in the last decade shook their faith in stock pickers. The winning funds steered clear of this year's 23 percent decline in bank stocks, based on the KBW Bank Index.
The struggles of Berkowitz and Miller, who run funds that are down more than 25 percent in 2011, reinforce the view that stock picking doesn't work as well as index investing in the long run, said Geoff Bobroff, an industry consultant.
Seeing No Value
"People have thrown up their hands," Bobroff said in a telephone interview from East Greenwich, Rhode Island. "They don't think they can find enough managers who add value."
All six of the consistently strong funds have posted gains of at least 4.1 percent a year since the industry redemptions began in 2007, while the Standard & Poor's 500 Index has lost an average of 0.4 percent.
Berkowitz's $8.9 billion Fairholme Fund fell 26 percent this year through Oct. 21 with wrong-way bets on banks such as Charlotte, North Carolina-based Bank of America Corp., down 50 percent in 2011. Berkowitz was named domestic stock fund manager of the decade last year by Morningstar, the Chicago-based research firm.
Miller's $964 million Legg Mason Capital Management Opportunity Trust slumped 33 percent this year, hurt by declines in financial companies, including New York-based Citigroup Inc., which is down 33 percent. Miller's larger fund, the $2.8 billion Legg Mason Capital Management Value Trust, bested the S&P 500 for a record 15 straight years through 2005. That fund lost 5 percent this year.
"There is no area we have spent more time looking at and not buying than banks," James Kieffer, co-manager of the $6.2 billion Artisan Mid Cap Value Fund, said in a telephone interview from Milwaukee.