Think you know everything about mutual funds? “Then I have something to tell you which may shock and discredit you.” (Lionel Hutz, The Simpsons) … Or at least make you say “hmmm.”
Bruce Berkowitz at Fairholme (FAIRX) and Fairholme Focused Income (FOCIX) has 140 times more money invested in his funds than Harry Lange has in Fidelity Magellan (FMAGX). We know this because Magellan's latest filing showed Lange with between $500,000 and $1 million in his fund.
Fully 75% of the balanced funds with star ratings of 1 star in 2005 were wiped off the face of the earth in the ensuing five years
Now that's attrition. We found that 1-star funds were much more likely to be killed off than higher-rated funds. Why? Poor performance and resultant poor flows mean a fund isn't likely to be a money winner for the fund company. On the one hand, it's bad for fund investors that these records get swept under the rug. On the other, investors in bad funds are probably better off getting their money back or having their fund merged into another.
This year is already the worst year for large-growth flows, with $29 billion in net outflows. Mind you, the category received $170 billion in net inflows in just 1999 and 2000 combined. Needless to say, it's been a brutal 10 years for large growth.
The last time short-term rates approached zero, December 2008, money flew out of money markets. This time around, it's flying in. While the yields may be similar, there is one big difference. The other time, people were worried about big funds breaking the buck. This time around, there's no panic.
GMO Emerging Country Debt III (GMCDX) has a 17.5% annualized 15-year return. No, that won't happen the next 15 years.
Along the way, the fund was actually top dog in its category in 2003 (165% return) and 2008 (9% loss). If ever there were a case for why you should look beyond a single year's return, this is it.
The highest turnover rate is Direxion Monthly Emerging Markets Bear 2x (DXESX) with a 5,062% turnover
Leverage, shorting, and extremely short stays by shareholders make for one heck of a turnover rate.
There are 18 funds on pace for their 12th straight year of outperformance versus their category peers. Considering the bear markets, credit debacles, and bubbles contained in those years, that's pretty impressive. Not surprisingly, only two all-equity funds made the cut.
So, clearly not all mistakes are swept under the rug. The Feeble Four are: Embarcadero Market Neutral (EFMNX), ING Emerging Countries (NECAX), Performance Short-Term Government Income (PFSFX), and ProFunds Bull (BLPIX). Gregg Wolper recently profiled the ING fund in a Fund Spy.
76 million yoga mats; 3,000 Rolls Royce Phantoms; 114 million Snuggies for dogs; 207 million 22-ounce Rogue Mocha Porters; 9.1 million subscriptions to Morningstar FundInvestor; 142 million 22-ounce Goose Island Sofie Ales; or bail out Lindsay Lohan 2,700 times.
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