Plus, T. Rowe's new fixed-income chief will have to think globally, and more.
Morningstar's fund analysts cover 2,000 mutual funds. Their full analyst reports, including Stewardship Grades, are available in Morningstar Principia Mutual Funds Advanced and Morningstar Advisor Workstation Office Edition.
Earlier this week, Vanguard, the more than $1 trillion asset manager, warned investors not to expect the strong domestic and international returns this year to continue forever. The MSCI US Broad Market Index is up 21.6% for 2009 through the end of September, while the MSCI EAFE Index is up an impressive 29%. Both are a far cry from the roughly 10% annualized returns these markets have traditionally returned.
This isn't the first time the firm has issues such a warning; it has issued similar notes when things were running hot in other asset classes, such as REITs, emerging markets, and precious metals.
The company went on to caution that it might be wise "to ensure that your asset allocation is in line with your long-term goals." In other words, reduce, or at least stop adding to, your allocation in the hottest asset classes. Besides closing a mutual fund for performance-related reasons, this is the closest a mutual fund manager gets to protecting investors from themselves and a contrast to other fund shops that would gleefully tout in ads the recent performance of hot funds.
Vanguard singled out four funds in its warning:
Reversion to the Mean Alert
Some managers have argued there is still room left for the market's recent rally to run. Not so, say a number of other prominent asset managers.
Bob Doll, BlackRock's