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Stories From 2009 That Still Mattered in 2010

Plus, Vanguard Convertible Securities goes global, and more.

Morningstar Analysts, 12/27/2010

A year ago we predicted we'd still be talking about Fairholme FAIRX manager Bruce Berkowitz and Doubleline Total Return DBLTX skipper Jeffrey Gundlach well into 2010. Neither former Morningstar Fund Manager of the Year disappointed.

The drama surrounding Gundlach's bitter divorce from former employer TCW stretched throughout 2010 and will continue in the new year. A trial date between TCW and Gundlach's new firm, Doubleline, is set for the middle of 2011 in California. Doubleline also recently disclosed in SEC filings that various federal agencies are investigating the circumstances of the breakup.

Despite the distractions, Gundlach had one of the most successful mutual fund launches in 2010. Doubleline Total Return has attracted almost $4 billion in assets since its launch in April. Moreover, it is one of the best-performing funds in the intermediate-term bond category with its 16.02% return from its inception through Dec. 22. The Barclay's U.S. Aggregate Bond Index is up 4.85% over the same period.

Meanwhile, Berkowitz has been in the news for more agreeable reasons. The $18.5 billion Fairholme is having another banner year thanks to the strong performance of General Growth Properties GGP and his financial-sector holdings. The performance was good enough to earn Berkowitz a nomination for 2010 Manager of the Year.

Berkowitz attracted more than $300 million to his first bond fund, Fairholme Focused Income FOCIX, and the fund is having a stellar year of its own. It's up 11.09% since its launch in January, compared with 5.99% for the Barclay's U.S. Aggregate index. And this is despite holding more than 20% of assets in cash all year.

We also thought Third Avenue's first bond fund was one to watch in 2010. Third Avenue Focused Credit TFCIX attracted $1 billion in assets and climbed 14.6% so far this year, good enough to top 75% of its high-yield peers. It looks like shareholders are going to have to keep a close eye on this fund a bit longer. Jeff Gary, who helped launch it in August 2009 recently left Third Avenue. Tom LaPointe, who was named comanager in September, remains as sole skipper.

Finally, we thought we would be still talking about the excessive fee lawsuit against Oakmark Funds advisor Harris Associates in 2010. Instead, in a unanimous opinion to which the fund industry responded with a big sigh of relief, the Supreme Court affirmed the longstanding Gartenberg standard for judging the appropriateness of fees. Shareholders will have to wait a bit longer to win an excessive-fee case. We aren't holding our breath.

2010 Stories That Will Matter to Us in 2011
So what stories from 2010 will we still be talking about in 2011?

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