World Beta Blog

Lose 72% of your investor’s $, make the cover of Barron’s

October 10th, 2009 by Mebane Faber

Comments

It’s Miller Time

I don’t even know what to say. Wouldn’t a story about AlphaClone be much more interesting? Like, say, how following Greenlight beats the market by 13% a year? Active mutual funds are an enormous fail for the investor.

My favorite stat:

CGMFX 10 yr annualized 19.59% returns. 10 yr annualized INVESTOR returns -13.94%!!! (Note: This is Heebner’s fund, not Miller’s, and reflects investors chasing performance buying high and selling low.)

—-

Off to take Momma to this!

More on this topic (What's this?)

Top 10 reasons ETF’s are superior to Mutual Funds (Intelligent Speculator, 10/12/09)

Mutual funds to become extinct?? (Intelligent Speculator, 1/22/10)

Read more on Mutual Funds at Wikinvest

AlanPendleton

Wow. Amazing that the investor return can be so radically different than the vanilla total return. It's not completely fair to fault Miller for the fact that his investors chose to buy high and sell low. The difference in the two statistics is due to the fact that on average the net assets of the fund were smaller during the good years and larger during the bad years. Hmm ... maybe the lesson here is to stay away from large funds.

WorldBeta

That stat is actually for Heebner's fund...

Wide Moat

I thought the same thing... down 72% in 18 months, then up 37% totals what?

Yep, still down about 62%... gulp.

moom

I don't understand how they computed that. I find the total fund return 2004-2008 as 50% according to the data they supply and the investor return as 17%, yet they claim the 5 year annualized return is -15%?

keithpiccirillo

Ouch! Kick a guy when he's down!
I've used Ken Heebner all the way back to when he was running a fund called New England Zenith, over twenty years ago. This was part of or just before Loomis-Sayles.
My biggest regret is not rebalancing enough during those big gaining years, and realising last year we really were in the beginnings of a recession, although our government leaders never mentioned the "R" word. I watch the moving averages and TA a lot more now.
So it goes.

wkevinw

The CGMFX performance stats are truly eye popping. I am not sure how they really gather them. Are people really that bad about buying high and selling low?

wlc

Yes... just look at the DALBAR studies.

MarkM

Hi Meb. It's one of my theories on low volume for this rally. The retail investor sold out at the lows and can not bring itself to participate. I don't think they are coming in any time. This is just pros trading now.

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The opinions expressed on this site are those solely of Mebane Faber and do not necessarily represent those of Cambria Investment Management, Inc. (“CIMI”). This website is made available for educational and entertainment purposes only. Mr. Faber is an Investment Adviser Representative of CIMI, an investment adviser registered with the states of California and Utah. This website is for informational purposes only and does not constitute a complete description of the investment services or performance of CIMI. Nothing on this website should be interpreted to state or imply that past results are an indication of future performance. A copy of CIMI’s Part II of Form ADV and privacy policy is available upon request. This website is in no way a solicitation or an offer to sell securities or investment advisory services. Mr. Faber and CIMI disclaim responsibility for updating information. In addition, Mr. Faber and CIMI disclaim responsibility for third-party content, including information accessed through hyperlinks. Faber receives affiliate commissions through Amazon and AlphaClone.

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