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Owner and Operator

Wally Weitz, president and portfolio manager of Weitz Funds, answered our 10 Questions.

Wally Weitz, 04/11/2011

This article first appeared in the April/May 2011 issue of Morningstar Advisor magazine. Get your free subscription here.

What's the best thing about running your own mutual fund company?
I get extra votes and can have influence over firm culture and day-to-day quality of life.

Does Wally Weitz the president of Weitz Funds ever have a beef with Wally Weitz the portfolio manager?
Not really. We are all very conscious of the difference between investing and the business of investing. We understand that if we invest well, the business will take care of itself.

You started your firm in 1983, right at the beginning of a long bull market. Lucky timing or brilliant foresight?
Actually, in the year prior to opening the firm, the Dow rose from 800 to 1,200, and I thought I might be starting at the "top."

When you launched the firm, what did you hope to accomplish?
I thought that by founding a new firm, I could pool a number of accounts that looked very much alike, charge a fee rather than commissions, focus more on managing assets, and build an important and valuable firm.

What's the biggest change you've seen in the mutual fund industry during the past 30 years?
The link between us and our shareholders has gotten more complicated in recent years, and we have been forced to pay more attention to marketing and distribution. The majority of our assets now come to us via third-party advisors using brokerage firm and other technology platforms. The new world brings efficiency and more sophisticated advice to individual investors but also adds layers of cost. I prefer the simpler times, but I've learned that people don't really want to hear my nostalgic rants.

What is the biggest challenge facing the mutual fund industry?
Warren Buffett has been critical of the proliferation of money managers, advisors, sellers of investment products, and other "helpers" whose fees consume a substantial portion of mutual fund returns. As one of these helpers, I take some umbrage at his criticism, but the industry's greatest challenge may be to improve the value proposition for fund shareholders before they revolt.

What should the industry do better?
Industry participants could no doubt improve their execution and communication and find ways to lower expenses, but some of the greatest damage to fund shareholders' wealth is self-inflicted.

Are today's shareholders more fickle and harder to please?
I don't think human nature changes much over time, but it seems that the proliferation of helpers who have a financial interest in promoting transactions have raised investors' levels of anxiety and created unrealistic expectations.

If your son Drew came to you and said, "I want to start my own fund firm tomorrow," would you a) get his head examined; b) encourage him but with words of warning; c) enthusiastically endorse the idea?
The fund business is complicated and crowded today, but for the right person, trying to build a new investment business can be great fun. I'd be encouraging.

With the amount of information that is freely available today, is it harder or easier to be a mutual fund manager than it was when you started?
It is terrific to have online access to an almost infinite amount of information. The trick, though, is to ask the right questions and to avoid being distracted by interesting but unimportant information.

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