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Kathy Panagopouloskathy.panagopoulos@morningstar.com
Manager Experience Pays, Says Morningstar Study

CHICAGO, May 04, 2001 – If your mutual fund has an experienced manager, there's a better than 50-50 chance you felt less pain than the average domestic-stock fund investor during the recent bear market, says Morningstar.

In its study, Morningstar considered funds with at least $100 million in assets and the sum of the most experienced managers or management teams since the bears first started gnawing on the Nasdaq Composite index last March.

Between the end of March 2000 and March 31, 2001, the Nasdaq tumbled nearly 60 percent, the S&P 500 fell nearly 22 percent, and most domestic-stock funds lost money. On average, though, funds guided by managers or management teams with at least four years' tenure lost less money in that time than both the S&P 500 and the average domestic-stock equity fund. The more experienced the group of managers, the less they lost relative to the S&P 500 and the typical domestic-stock fund.

The funds of stock-pickers with below-average tenure, on average, also lost less than the S&P 500 during the measuring period, but didn't perform as well as the typical U.S. stock fund or funds led by more-experienced managers.

"Though a resurgence in value funds during this 12-month time period helped experienced managers look good because many tenured fund managers lean toward the value end of the spectrum, funds with seasoned hands tended to do well in all respective categories," Dan Culloton, managing editor of Morningstar.com's News and Markets Team, said. "There's evidence that veterans of both value- and growth-investing camps added an advantage. However, no two bear markets are the same, so it's hard to tell how the funds that have held up well during this rough spot will fare the next time." 

The Morningstar study also found:

  • Almost 54 percent of the domestic-stock funds that met the net-asset and manager-tenure criteria finished the 12 months that ended March 31 in the top 50 percent of their categories.
  • More than a third of the funds that beat their peers were value offerings, while 27 percent were growth funds. 
  • Growth managers known for their restraint held up well. Richard Freeman, a strict buy-and-hold investor who has run Smith Barney Aggressive Growth for 18 years, beat the S&P 500 by nearly 11 percentage points and outperformed 97 percent of the large-growth category between the end of March 2000 and the beginning of April 2001.
  • Practiced small-growth investors who shunned technology, such as Richard Astor of the Meridian Fund, Robert Gardiner of Wasatch Micro Cap, and Ralph Wanger and Chuck McQuaid of Liberty Acorn, crushed the Russell 2000 Growth index and the rest of their category over the same time period.
  • Experienced doesn't mean staid. Managers such as Kenneth Heebner of Nvest Growth and CGM Capital Development, Antonio Antagliata of Waddell & Reed Accumulation, and Gary Pilgrim of PBHG Growth all employ the fast-trading stratagems that have engendered volatility. Aggressiveness paid off for Antagliata, whose fund lost far less than the S&P 500 and 96 percent of its large-blend peers in the 12 months ending in March. However, it penalized Heebner, whose funds trailed more than 95 percent of its peers, and Pilgrim, whose technology-heavy fund lost more than 88 percent of its category.

For the complete article "Songs of Experience: Tenure Pays in Bear Market," which also includes a table of the 10 most experienced fund managers, go to:


About Morningstar, Inc.
Chicago-based Morningstar, Inc. is an independent provider of reliable, unbiased investment information. Morningstar.com is listed among the top investing sites by publications such as The Wall Street Journal, Barron's, SmartMoney, Money, Worth, and U.S. News & World Report. Morningstar provides investment information for a number of leading Web sites, including Microsoft MoneyCentral, Quicken.com, America Online, Yahoo! Finance, and Netscape Personal Finance. 

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Copyright 2001, by Morningstar, Inc. All rights reserved.

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