PMs Exhibit Same-Difference Behavior
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Friday, September 10, 2010

PMs Exhibit Same-Difference Behavior

Portfolio managers are moving more closely in step with the market reacting to violent swings in the debt and equity markets, according to a Bloomberg article .

Bloomberg's Sree Vidya Bhaktavatsalam cites William Danoff, manager of the Fidelity Contrafund, as having compiled one of the best long-term records in the mutual fund business, gaining an annualized 8.8 percent a year over the 15 years through Sept. 3, which is better than 96 percent of his peer group, according to Morningstar. One key to Danoff's success, writes Bhaktavatsalam, is making sure his portfolio isn't just a mirror of the overall U.S. market. However, the $62 billion Contrafund, belying its name, this year has reportedly tracked the benchmark index more closely than in any period in its four-decade history.

In fact, six of the 10 largest U.S. stock funds have reported almost identical correlations to the S&P 500 this year, according to data compiled by Bloomberg.

The article quotes BlackRock Chief Equity Strategist Robert Doll saying that his firm was expecting 2010 to be the year when stock selection would add value. "That hasn't been the case," he said.

Mohamed El-Erian, the chief executive officer of Pimco in Newport Beach, Calif., was also quoted saying that his firm was struck by "the size and correlated nature of the market moves" this year.

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