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The Fund Manager of the Decade Finalists

These managers have made the most of a lousy 10 years.

Karen Dolan, 12/02/2009

Remember the Prince song that went: "We're gonna party like it's 1999"? Well, securities markets did back then, and 10 years later we're still suffering from the hangover.

Bond funds were a bright spot over the past 10 years, but it was a brutal time for equity investors. Not one, but two severe bear markets lasting roughly two years each decimated investment accounts. As we near the decade's end, broad equity market indexes show flat to negative returns for the entire 10-year stretch.

Stringing together a good record in that environment was a challenge as markets flip-flopped between rewarding and punishing excessive risk-taking. Of all domestic-equity funds, for example, barely a third have positive 10-year returns. The rest haven't been around that long or lost money. The managers listed below, however, excelled in this difficult environment by relying on their own blend of original research, making capital preservation a priority and sticking with their approaches in good times and bad.

The Award
The Manager of the Decade award is not just about returns. 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 is spending much of November and December researching the nominees and debating the merits of each for this award.

We've narrowed the field to five nominees for each award: domestic, foreign, and fixed income. We should point out, however, this is not a list of names for the next decade. Though we wouldn't be surprised to see these managers continue to shine, this award is specifically focused on 2000-09.

Though we previously indicated we would announce the winners in early December, we're going to wait until the decade comes to a close before making a final decision. We'll announce the winners on Morningstar.com in mid-January soon after we release the winners of the Fund Managers of Year for 2009.

Earning more than 10% annualized since the start of the decade is a remarkable feat given that equity markets were flat, but our group of nominees pulled it off. The odds seemed stacked against Fidelity manager Joel Tillinghast who kicked off the decade with one of the largest small-cap funds around and a portfolio of more than 700 stocks. That's not the profile you may expect from a fund that went on to knock the socks off the competition. Tillinghast's style isn't easily defined, but it leans toward value and allows his investing acumen to run free.

Charlie Dreifus and Don Yacktman both run strategies inspired by the Ben Graham school of value investing, and they aren't afraid to park money in cash when good values are scarce. Dreifus, who hunts for small-cap companies, got ahead this decade by avoiding big losses with his laserlike focus on balance sheets and valuations. Yacktman has been a consistent and adept investor whose stock picks have put him head and shoulders above peers, not only in this decade, but throughout his 17-year tenure on the fund. Both investors are prone to dry spells relative to their peers, but patience with their strategies has paid off.

Steve Romick's modus operandi included avoiding losses and being willing to sit on cash, too. With an average cash position in the 30% range over the decade (a portion of which was held as collateral for the fund's short equity positions), Romick showcased admirable moderation by hanging back when he couldn't find the right opportunities at the right price and looking not only at a company's equity, but across the capital structure. The part of Romick's portfolio not sitting idle made its way into an array of high-yield fare as well as energy and consumer services companies, which paid off handsomely.

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