January 2006

Sex Matters: Gender and Mutual Funds

To shed some light on the relationship between men and women and money, Stefan Ruenzi, an assistant finance professor at the University of Cologne in Germany, and one of his Ph.D. students, Alexandra Niessen, investigated the differences among male and female US mutual fund managers in their study, "Sex Matters: Gender and Mutual Funds." They found that female fund managers took less risk and followed less extreme investment styles that are more consistent over time. They also found female fund managers were less overconfident and traded less frequently. However, they also found no evidence that these differences were reflected in fund performance. These and other finding are detailed in a 54-page report which can be found here.

New Fund Focuses on Efficient Frontier and ETFs

The Symphony Wealth Management Group today announced the launch of their new Ovation Fund, a dynamic asset allocation fund which utilizes Exchange Traded Funds (ETFs) as its underlying holdings. The Ovation Fund is managed by Dr. William Breen, Emeritus Professor at The Kellogg School of Management at Northwestern University, where he served as Chairman of the Finance Department. Dr. Breen said, "With the Ovation Fund, we've combined the power of a dynamic asset allocation framework to take advantage of changing market conditions, with the exceptional control that ETFs provide, and have created an investment strategy that we believe gives investors a better opportunity to realize the efficient frontier we've all heard so much about." The Class C shares carry no initial load, but have a contingent deferred sales charge of 1.5%, up to 12 months from purchase. For more information see the press release or visit the firm's web site.

Study Shows Simple Way to Find Funds Likely to Outperform

Mark Hulbert, editor of The Hulbert Financial Digest, reports on a very interesting, new mutual funds selection study by three finance professors in a New York Times article published here in the International Herald Tribune. Hulbert said the professors' "idea is to compare each fund's returns with how it would have performed had it simply held, without trading, the stocks it listed in its most recent public disclosure." This simple approach avoids "benchmark confusion," and shows that "on average, funds with consistently positive return gaps were much better bets for future performance than those that were consistently negative..."

Spotlighting Seven No-Load Focus Funds

Timothy Middleton reports, in this article from MSN Money, that, while "Some historically hot 'focused' mutual funds have struggled recently and fallen out of favor. The best are likely to bounce back fast." Middleton spotlights these seven no-load focus funds "which typically own about two dozen stocks (as opposed to the 100 or more stocks held by many funds)" - Longleaf Partners (LLPFX), Clipper (CFIMX), Oakmark Select I (OAKLX), Marsico Focus (MFOCX), TCW Galileo Sel Equity I (TGCEX), Jensen J (JENSX), CGM Focus (CGMFX), and compares the 1-, 3-, 5-, and 5-year percentile rank in category for each fund.

Indices vs. Actively Managed Mutual Funds

Standard & Poor's has released it's annual Indices Versus Active Funds Scorecard (SPIVA) and the battle between actively managed funds and the indices they benchmark against ended 2005 in a stalemate, the firm announced. ...indices outperformed a majority of active funds in six out of nine style boxes last year, while active funds outperformed indices in the other three. According to the Scorecard, the S&P MidCap 400 outperformed 76.0% of actively managed mid-cap funds, and the S&P SmallCap 600 outperformed 60.5% of actively managed small- cap funds in 2005. Conversely, 55.5% of actively managed large-cap funds outperformed the S&P 500 during the year.

No-Load Fund Profile: The Hodges Fund

Ken Hoover profiles the no-load, mid-cap blend, Hodges Fund (HDPMX), in this article from Investor's Business Daily via Yahoo Finance. He says "The fund is on a hot streak that began with an 80.2% gain in 2003. It was up 5.02% this year going into Monday vs. 1.06% for the S&P 500. Hodges Fund's three-year average annual return was 39.4%, compared with 13.85% for the S&P 500. The five-year average annual gain was 14.18% vs. 0.42% for the S&P." Hoover added that "The Hodgeses divide the fund into three parts. In one, they put what they consider core growth names.. In a second, they put beaten down value plays... The third basket is reserved for high P-E ratio, high growth-rate stocks..." Current funds holdings and more management strategies can also be found in the original article.

Mutual Fund Investors Eye Socially Responsible Funds

Most American investors think that socially responsible mutual funds contribute to better corporate behavior by keeping companies more honest and influencing them to make safer products, according to a major new investor survey conducted by Calvert. And, for the first time since Calvert has been gauging the views of investors, the survey shows that over half (54 percent) of investors not in socially responsible investment (SRI) mutual funds now are interested in investing in them. For more details, see the press release.

Forbes 2006 Mutual Fund Guide

Edited By Scott DeCarlo and John Chamberlain, the Forbes 2006 Mutual Fund Guide is out. According to the web site, "...[The] semiannual mutual fund survey grades the performance of roughly 2,500 U.S. and non-U.S. stock and bond funds through both up and down market cycles [and enables visitors to] Sort Funds By: Up Market Grade | Down Market Grade | Name | Return | Yield | Expenses | Charge," as well as view mutual funds by fund types. There are also sections on "standouts," "best buys," feature articles and a special report on 401(k).

Spotlight: Hennessy Focus 30 Fund

Among 6,780 U.S. diversified equity funds tracked by Lipper, The Hennessy Focus 30 Fund was the top performing diversified mutual fund in the U.S. for 2005. The no-load Hennessy Focus 30 Fund returned 32.74% for the one-year period ending 12/31/05, compared with a return of 4.91% for the S&P 500 Index for the one-year period. The Focus 30 Fund has averaged a return of 23.09% annually since its inception on 9/17/03, compared with an average return of 10.91% for the S&P 500 for the same period.

BusinessWeek Mutual Fund Scoreboard

BusinessWeek is touting its worthwhile Mutual Funds Scoreboard, which is available at BusinessWeek Online and updated monthly, in this article from the magazine's web site. Detailing how funds are selected, BusinessWeek said, "To get a rating, a fund must have at least five years' performance history. With data prepared for BusinessWeek by Standard & Poor's, we measure each fund's monthly performance for the past 60 months. When a fund fails to beat the return for U.S. Treasury bills, it earns negative marks, which are subtracted from the total return to come up with a risk-adjusted return. Funds are then ranked by their risk-adjusted returns from A (superior) through F (very poor). The A funds are an elite group -- the top 7.5%..."

Foreign Fund Investments Top US Funds

John Waggoner, USA Today, reports that, "Investors poured more money into international and global stock funds in 2005 than into funds that buy only U.S. stocks -- the first time that's happened in more than 20 years. International and global funds were flooded with an estimated $110.1 billion through November, vs. $49.7 billion for U.S. stock funds." Details can be found in this article from USA Today, and top-performing global funds can be found here in the newspaper's fund screener.

Profile: Hennessy Cornerstone Growth Fund

Murray Coleman details the investment strategy of Neil Hennessy, manager of the no-load Hennessy Cornerstone Growth Fund (HFCGX) in this article from Investor's Business Daily, via Yahoo Finance. According to Coleman, Hennessy "alters his portfolio just once a year," and, he adds, "The process has yielded results. For the five years ended Jan. 11, the fund's average annual return of 17.11% topped the 11.17% notched by its small-cap blend peers tracked by Morningstar and the S&P 500's 1.17%. In 2002 the fund lost 4.7%, less than half as much as its rivals."

Mutual Fund Trends 4th Quarter 2005

Ben White, Washington Post Staff Writer, recently went online to discuss trends in the mutual funds industry during the last quarter of 2005, and answer readers' questions. He said that "natural resource funds slowed down during the fourth quarter, ...that growth funds beat value funds, and large-cap funds topped their small-cap counterparts," among other interesting tidbits which are detailed in the Washington Post article.

Real Estate Funds for the Long Haul?

Meg Richards of the Associated Press says "Analysts have been nervously writing yearend epitaphs for real estate for the last couple years, but the sector has kept outperforming the overall market. Despite worries that real estate funds are due for a breather after six strong years, smart investors are likely to hang on for the long haul." In making a case for a long-term position in real estate funds in this article from the San Jose Mercury News, Richards mentions that actively managed funds have outperformed index and exchange traded REIT funds, and she cites three Morningstar picks among mutual funds, including one no-load, the T. Rowe Price Real Estate Fund (TRREX), of which, she says "while wary of taking big bets, employs strong fundamental research and a long-term perspective that is likely to deliver the goods over time."

Morningstar Runners Up for Manager of the Year

Having found several mutual fund "managers who went above and beyond to deliver great results over the long haul and in 2005," Morningstar has followed its Managers of the Year article with this Runners Up for Manager of the Year article, which which profiles: Domestic-Stock Manager of the Year Runners Up - Dodge & Cox Team, Dodge & Cox Stock (DODGX), Fixed-Income Manager of the Year Runner Up - Jeffrey Gundlach, TCW Galileo Total Return Bond (TGLMX), and International-Stock Manager of the Year Runner Up - James Moffett, UMB Scout WorldWide(UMBWX). As an added bonus, you'll also find a dozen "readers' picks" for Manager of the Year at the bottom of the article.

Growth Funds Outpaced Value Funds in '05

Kathy Chu, USA Today, reports that "Growth funds staged a long-awaited comeback in 2005, edging past value funds for the first time in five years." Citing statistics from Lipper, Chu said,"...U.S. growth funds rose 7.5% in 2005, compared with a 6.6% increase in value funds... The average diversified U.S. stock mutual fund rose 6.6% last year." Details can be found in this article from USA Today.

Morningstar Announces 2005 Fund Manager of the Year Awards

This week, Morningstar announced the firm's selection of its 2005 Fund Manager of the Year Awards, including leaders in three categories -- domestic stock, international stock, and fixed income. The categories and announced award winners are: Domestic-Stock Fund Manager of the Year: Christopher Davis and Ken Charles Feinberg, Selected American Shares (SLASX), Davis NY Venture A (NYVTX); International-Stock Fund Manager of the Year: Robert Lyon, Matthew Pickering and Jerrold Senser, ICAP International (ICEUX); Fixed-Income Fund Manager of the Year: Tad Rivelle, Laird Landmann, Stephen Kane, and David Lippman Metropolitan, West Total Return Bond (MWTRX). Three of the four winners manage no-load funds (the exception is the Davis NY Venture A Fund). Profiles of the top managers and their funds can be found at Morningstar, here.

Oppenheimer Sees Four Drivers of Investment Returns in 2006 and Beyond

According to investment executives at OppenheimerFunds, changes in the behavior of leading market participants and structural changes in the stock and bond markets have resulted in an extreme focus on short-term investment strategies and results. In this press release, Kurt Wolfgruber, Chief Investment Officer at OppenheimerFunds, said, "Over time, we anticipate that these anomalies will be reversed, and that the investors who are willing to patiently measure results over years rather than over quarters or weeks will be rewarded." The firm identifies the following four investment themes for 2006 and beyond: corporate America spends, inflation controlled and Fed Near end of tightening cycle, the housing market slows, and foreign investors buy U.S. equities.

Exchange-Traded Funds (ETFs) Grew in '05

Meg Richards, writing for the Associated Press, reports that "It was another year of growth for exchange-traded funds, as the number of offerings and asset levels swelled even further in 2005," in this article published at the Washington Post. Richards added that "With about 200 ETFs on the market, representing all manner of indexes, sectors, world regions, countries and even gold, fund providers are seeking new and interesting ways to expand." Ronald L. DeLegge, publisher and editor of ETFGuide.com, interviewed in the article said, "The next areas of growth are likely to reach into parts of the market that were once the exclusive province of more sophisticated investors, such as commodities and currencies." And, referring to currencies, DeLegge added "They're starting to equitize assets that traditionally in the past have not been equitized."

Domestic Mutual Funds Beat Market in '05

Managed domestic stock mutual funds outperformed the overall stock market in 2005, although both sported only single-digit returns for the year. Equity funds returned an average of 7.16 percent, compared with the Standard and Poor's 500 index return of 3.51 percent, according to mutual funds watcher Lipper, as reported by Michael Martinez of the Associated Press in this article published in the Post and Courier. In general growth funds outpaced value funds, and mid-capitalization funds led both large- and small-cap funds.