financial planner based in McLean, Virginia has uncovered some interesting findings related to mutual fund performance. Following up on a hunch that funds trading under a manager's name tend to outperform, Barry Glassman
found out that he was well, prescient.
Of the top 500 equity mutual funds ranked by assets under management, sixteen bear their manager's last name. Glassman found that all of the 16 funds beat the S&P in 2002, while 15 did so in both 2001 and 2000. Only the Marsico Focus fund fell short. Thus, 93.7 percent of the "surname" funds beat the S&P Index verses just 42.2 percent for the universe of the top 500.
Meanwhile, turnover within the surname funds was found to be lower, 36 percent vs. 61 percent for the top 500 aggregate. All but one of the 16 managers has headed their fund since inception. In the case of the exception, Chris Davis took over for his father.
As for why such funds outperform, Glassman pointed to personal assets, as many of the managers have a financial stake, some significantly, and he asks, "Who but the owner is in it for the long run?"
"Owners have a vested interest in applying prudence and principles with a natural accountability to their shareholders. These managers are not going to fire themselves. Nobody ever points his finger at Mr. Fidelity or puts the blame on Ms. Aim."
Glassman also pointed to the level of confidence someone must have before nailing his name on the door. "These managers are established, confident individuals," he said.
"Managers matter. It's trendy to look at performance and other statistics in evaluating a fund, but we must remember what matters most - the manager who chooses which investments to buy and when to buy them."
Glassman also found that the majority of the name funds have positive alphas and low betas, numerical ratings used to gage safety vs. risk factors by fund analysts. The funds also ranged from the very focused (30 holdings for Jensen), to broadly diversified (400+ for Gabelli Asset).
The multi-faceted Glassman is also first vice president of Cassaday & Company, a McLean-based registered investment advisor managing over $325 million, as well as the financial planning columnist for the Legal Times and President-Elect of the Greater Washington Financial Planning Association.
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