(PUB) Morningstar FundInvestor

August 2014 Vol. 22 No. 12

FundInvestor Research and recommendatio s for the s riou fund investo

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It Pays to Find Managers Who Invest With You

cantly increases your chances of success. The success rate for all funds extant during that period is well below 50% because many of them did not survive. Going from about 40% success to 67% is truly moving the needle. Where to Find Manager Ownership The SEC requires that fund companies report manager ownership annually in these ranges: $0 , $1 – $10 , 000 , $10 , 001 – $50 , 000 , $50 , 001 – $100 , 000 , $100 , 001 – $500 , 000 , $500 , 001 – $1 million, and more than $1 million. The data can be found in a fund’s Statement of Additional Information. You can also find the top level of manager ownership on mfi.morningstar.com . Go to the FundInvestor 500 tab, select a Morningstar Category, and scroll over to the Manager Ownership column. You can also see the data on the Fund Spy tab when you select Spy Selector and enter a ticker. Important Changes in Manager Ownership Because ownership is reported in ranges rather than shares or a specific dollar amount, a manager essen- tially has to move his ownership level by two bands for you to be certain he has actually made a transac- tion in fund shares. However, since the markets rose sharply last year, it’s highly unlikely that any decrease in ownership is simply attributable to depreciation.

RusselKinnel, Director of FundResearch and Editor

Fund Reports

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The Morningstar 500 is not quite a recommendation list, but it’s close. I aim to help you track existing investments and find good new ones. I scour the fund universe for great funds, but I also include some merely adequate funds that are widely held. I look for funds with strong fundamentals such as low costs, strong management, and sound strategies. Many managers in the Morningstar 500 invest more than $1 million in their funds—the highest reporting range required by the SEC . However, not all do. So, I was curious to see whether Morningstar 500 managers with more than $1 million invested out- performed the rest of the Morningstar 500 . In fact, they did. Looking at the list we published in October 2006 , we found a success rate of 67% through June 2014 . Success rates are calculated by asking what percentage of funds survived and outperformed over the ensuing period. It’s a way to account for funds that perform poorly and are merged away. Meanwhile, the funds where managers had less than $1 million invested produced a success rate of 60% over that same time period. So choosing Morningstar 500 funds with managers having more than $1 million invested helped, though not dramatically.

Calamos Market Neutral Dodge & Cox Income Harding Loevner Int’l Equity Janus Balanced

Morningstar Research The People Behind Target-Date Funds

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The Contrarian

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Being Logical and Detached Always Trumps Being Emotional

Red Flags

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3 Popular Funds Merit More Scrutiny

Market Overview

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Leaders & Laggards

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Manager Changes and News

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Portfolio Matters

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Should You Add Longevity Protection to Your Plan?

Tracking Morningstar

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Analyst Ratings

I haven’t seen a lot of managers sell their funds, so it does seem significant when they do. Here are a few:

Income Strategist

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Funds With Big Yields Are Tempting but Treacherous

Mario Gabelli isn’t hurting for cash. As CEO of GAMCO Investors GBL , he hauled in $85 million in 2013 . Yet he also pared his holdings in Gabelli Asset GABAX from more than $1 million

FundInvestor 500

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FundInvestor 500 Spotlight

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From another perspective, combining the Morningstar 500 and manager investments over $1 million signifi-

Follow Russ on Twitter @RussKinnel

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