These managers have made the most of a lousy 10 years.
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 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.
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.
All of our nominees have been well-known for some time, but it wasn't until this decade that Bruce Berkowitz truly made a name for himself. He is just now closing in on his 10-year record at Fairholme Fund
David Herro, Jean-Marie Eveillard, and the EuroPacific team have all won the Manager of the Year award in the past, but Dennis Stattman of BlackRock Global Allocation
Stattman shops globally across asset classes. Such an expansive universe exposes the fund to more opportunities to succeed as well as to fail. Stattman's bets are bold but are usually well-placed. Eveillard also has a wide and flexible mandate that he's employed masterfully. Sure, Eveillard was in and out of retirement for a significant portion of the decade, but it was his picks, process, portfolio, and handpicked successors that prevailed. Few investors have been as on the mark with their bottom-up and top-down views as Eveillard, whose general caution has been rewarded handsomely.
American Funds EuroPacific Growth
The Manning & Napier team is the real hidden gem on this list. The team brings a unique and attractive focus on absolute returns to research companies of all sizes around the globe. The results speak for themselves, not only in World Opportunities, but across Manning & Napier's entire lineup.
All five fixed-income nominees have received Morningstar's Fund Manager of the Year award in the past. Bill Gross has won it three times (1998, 2000, and 2007). Over the many years since PIMCO's founding, Gross has successfully led an evolution of the firm and the fund as both grew exponentially. At $192 billion, PIMCO Total Return
Dan Fuss of Loomis Sayles Bond
Karen Dolan is Morningstar's director of fund analysis.