Relative Performance is Back
From Wall Street Journal
It's been a while in coming, but managers of technology funds are once again talking about relative performance. In the days prior to the record performance run of the previous five years, managers would often cite performance against their peers, not their absolute performance, as the appropriate measure. Case in point: the paper's profile of Dennis McKechnie, manager of Pimco Innovation fund. The paper reports he was "upbeat, even as his $5 billion fund had already lost 3% of its value. His reasoning was that his fund was ahead of the S&P Technology Index by 1.3 percentage points.

Legg Mason Manager's Streak in Doubt
From Wall Street Journal and the New York Times
William Miller's nine-year winning record against the S&P 500 as manager of the Legg Mason Value Trust is in danger of being ended by this year's tech wreck, both the Times and the Journal report. The Journal argues that the 36 percent decline in Gateway's share price (the stock comprises 5.4 percent of the fund) is to blame. Prior to yesteray, his fund was beating the index by roughly 100 basis points. Now its lead is just 41 basis points. The articles also reveal that the broker-sold fund has seen redemptions of up to $20 million a week recently. So far in the fourth quarter redemptions have reached $314 million from the $13 billion fund. And this comes at a time when value funds should be safe havens.

Are Funds Dumb Money?
From USA Today
John Waggoner refutes the conventional wisdom that surging flows into funds drive returns in the stock market. If this were true, he points out, why is the market down when flows have reached $291 billion this year? Last year they were just $188 billion. Waggoner, does though, see potential for a rebound in the rising cash levels of funds. After arguing the professional money managers may be the new "dumb money", he concludes that fund managers are selling low (raising cash) after buying high over the last 12 months. Cash as a percent of assets in March was four percent. It is now at six percent, its highest level since August 1998.

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