The Morningstar Fund Managers of the Decade

For investors, the 1980s and 1990s were decades worth celebrating, but the 2000s? Not exactly. Stock market returns were meager, and though bonds performed better, it was anything but a smooth ride. In spite of the challenges, however, some managers not only topped their peers, but posted strong absolute gains as well.

The Manager of the Decade award is not just about returns, though. We consider the risks assumed to achieve those results and take into account the strength of the manager, strategy, and firm's stewardship. We also think it's a greater feat to make a lot of money for a lot of people than to earn sky-high returns on a tiny pool of assets, so asset size factors in. Our team of fund analysts spent much of November and December researching the nominees and debating the merits of each for this award. It was a tight race with strong nominees across the board, but the following managers took home the awards.

Fixed Income
Bill Gross
PIMCO Total Return: 7.7%*; Category Average: 5.5%* 

No other fund manager made more money for people than Bill Gross. Investors of his flagship, PIMCO Total Return PTTRX, are $47 billion wealthier for the decade. (Our wealth creation figure is the aggregate return made on dollars invested in the fund throughout the entire period.) The fund was already large in 2000, with approximately $32 billion in assets, which could have presented quite a handicap. It ended the decade much larger at more than $200 billion. But it succeeded in outsmarting the competition even with its behemoth size and continues to do so. Gross has managed the fund's and the firm's remarkable growth well.

Gross has stayed ahead of the competition throughout the decade by making the right calls at the right times. His successes have come in a variety of forms. For example, despite the mess that mortgages created in the market, bonds backed by mortgages have been one of the fund's largest sources of excess return. Other good calls have come in the form of yield-curve bets and plays on emerging markets and corporate and foreign bonds. Gross was betting against the dollar in 2006 and was vindicated when the dollar declined versus other currencies. Gross is often accused of relying heavily on duration plays, but in reality, they haven't once been the top earner.

It is clear from his investment calls and topnotch performance that Gross is one of the best investors of our era. Many investors eagerly await the insights in his monthly investment outlook. And in 2009, investors poured more than $50 billion into PIMCO Total Return. But he hasn't done it alone; he's surrounded himself with a lot of smart people at PIMCO, including Mohamed El-Erian, Paul McCulley, Michael Gomez, and others who have made him even better and who give us confidence in PIMCO's ability to remain a good steward of the hundreds of billions of dollars entrusted to them.

Domestic Equity
Bruce Berkowitz
Fairholme: 13.2%*; Category Average: 0.01%*

By the end of the decade, Bruce Berkowitz had made his name as a top investor, but he laid the foundation when he first launched Fairholme FAIRX in December 1999 and was known to few. Think back to what was transpiring at the time. Growth stocks, especially tech and telecom companies, were topping the performance charts with eye-popping gains. Sticking with a value discipline, let alone launching a value fund, was considered lunacy by much of the fund industry, which was busy riding the wave and serving up new growth and technology funds. Funds left and right espousing value disciplines were abandoning their mandates to partake in the party. Yet this fund's earliest portfolios held boring old-economy stocks such as Berkshire Hathaway BRK.B, Leucadia LUK, White Mountains Insurance WTM, Mercury General MCY, and Jefferies Group JEF. Berkowitz's holdings went on to post spectacular gains just as the air was coming right out of the growth bubble.PAGEBREAK