Morningstar recently did an article about their nominees for fund manager of the decade. They listed the five managers below (although Heebner (CGMFX) and Pilara (RSPFX) are strange and notable exceptions). Their criterion is:
“The Manager of the Decade award is not just about returns. We consider the risks assumed to achieve those results and take into account the strength of the manager, strategy, and firm’s stewardship. We also think it’s a greater feat to make a lot of money for a lot of people than to earn sky-high returns on a tiny pool of assets, so asset size factors in.”
The five managers are:
Interestingly enough, following Seth Klarman’s top 20 positions on AlphaClone would have beaten all of these. There is a great huge dump of Seth Klarman related info over on HedgeFundLetters. One of the other nice things about Klarman is you can clearly see the independent thinking – there is not a ton of overlap with his positions and those of other HF managers.
You know how I feel about mutual funds – it’s kind of looking to Europe for the best players when the NBA clearly attracts the best talent.
In related news is a nice article from the FF boys on Luck vs Skill in Mutual Fund Performance.
If you would have just cloned/owned and rebalanced Berkowitz's top holding throughout the decade, Alphaclone reports a 21.8% annualized return. Unbelievable.
Aren't your comparisons of returns completely unfair? Sure I know NOW that the top 20 positions of Baupost COULD HAVE beat these. I also know NOW that I should've bought every possible stock at the March lows. I think you're being 'historically selective' with your comparisons.
“You know how I feel about mutual funds – it’s kind of looking to Europe for the best players when the NBA clearly attracts the best talent.”
i'd like to use this with your permission, how true!
My point was not that I would have selected Baupost in 2000 vs. these guys (I was still in college studying genetics and had no idea who Klarman was). My point is there are (lots of) hedge fund managers that beat even the BEST mutual fund managers.
And yes it is fair since you're comparing both ex post. (ie you're looking back at who the best 5 mutual funds were, then I'm comparing that to just one great HF.)
Now, if your question is: “Can someone identify superior managers that add value ahead of time NOW”, then that my friend is the right question.
Sure, everything on the blog is public.
Why the change from NCAA?
There are more than a few reasons why Klarman has done so well.
Price/Mutual Qualified arbitrage background must have instilled in him some uniquely good habits.
50% cash at times, means he takes full advantage of opportunity cost and selects set-ups, or sits on his hands, instead of fund managers who daily scale in and out of positions.
If you take a look at his current holdings, many of the names are a mystery, yet he sees value.
Picking winning small caps and running with them over their life cycle to see them develop into large caps allows fund managers to outperform.
Why the change from NCAA?
There are more than a few reasons why Klarman has done so well.
Price/Mutual Qualified arbitrage background must have instilled in him some uniquely good habits.
50% cash at times, means he takes full advantage of opportunity cost and selects set-ups, or sits on his hands, instead of fund managers who daily scale in and out of positions.
http://papers.ssrn.com/sol3/papers.cfm?abstract...>
If you take a look at his current holdings, many of the names are a mystery, yet he sees value in things like Liberty Media.
http://www.gurufocus.com/holdings.php?GuruName=...>
Picking winning small caps and running with them over their life cycle to see them develop into large caps allows fund managers to outperform.