Our Runners-Up for Fund Manager of the Year

Picking the winners of our Fund Manager of the Year awards for 2004 was extremely tough. Many of our longtime favorites produced excellent returns, and some managers were inspired to step up and adopt measures that helped fundholders, even if the managers' short-term profits were hurt.

We look for managers who do right by shareholders and put up strong long-term and single-year performances. The 2004 runners-up did an outstanding job on both fronts. It smarts that we can't give them Manager of the Year awards, too, but we can at least recognize their contributions.

Many past runners-up have gone on to win Fund Manager of the Year awards in later years.

Domestic-stock runners-up: Chris Davis and Ken Feinberg
  Selected American Shares (SLADX)
Of all the good things that fund managers did for their shareholders, I can't think of anything better than Chris Davis and Ken Feinberg's move to offer a new share class that's 25 basis points cheaper than this fund's standard share class. There’s been dreadful stagnation in fund expenses even though assets have grown enormously over the past 20 years, and few fund shops have done anything about it. Davis and Feinberg, on the other hand, didn't think that their shareholders should have to pay the 12b-1 fee required by Charles Schwab if they invested directly with Selected Mutual Funds. No one else has done this because Schwab insists that fund companies not offer a cheaper share class anywhere else, which fuels the lack of competition on expenses. Schwab has since retaliated by cutting off new sales to the Selected funds from its no-transaction-fee supermarket.

Of course, that’s not all that Davis and Feinberg have done. They've produced outstanding long-term returns by focusing on a firm’s true cash earnings and making sure they're buying at a sufficient discount to intrinsic value. The fund’s returns might not look like all that much compared with those of a small-cap fund, but they look downright brilliant when compared more accurately with other funds focusing on blue chips.

Foreign-stock runners-up: Sarah Ketterer, Harry Hartford, and James Doyle
 Causeway International Value (CIVVX)
Their record at Causeway is fairly short, but Ketterer and Hartford enjoyed a long, distinguished career at Hotchkis & Wiley before they set out on their own. If you combine the two records, it's truly impressive.

The trio considers stocks across the market-cap range, but management insists on discounted prices and won't hesitate to sell a name as it approaches its price target. That sell discipline--along with a preference for small position sizes--attests to the team's risk-consciousness.

In 2004, the fund put up a 26.3% return, thanks to an eclectic bunch of value stocks such as French construction and toll-road operator Vinci and Telecom Corp. of New Zealand. No closet indexers here, the trio has served investors well through all sorts of turbulence.

Fixed-income runners-up: Dan Fuss and Kathleen Gaffney
 Loomis Sayles Bond (LSBRX)
Fuss and Gaffney run one of the boldest bond funds around, and they do an amazing job. While most bond funds stick to a very narrow band, Fuss and Gaffney can go just about anywhere. They can and do make currency bets, country bets, credit bets, and interest-rate bets. They're very informed bets, but quite risky nonetheless.

Coming into 2004, Fuss and Gaffney were bearish on interest rates and on the U.S. dollar, but fell behind the pack when market yields continued to fall and the dollar held its own in the year's first few months. But they stuck to their guns, and when rates reversed course, their cautious nature, which includes holding substantial high-yield and non-U.S. positions, bore fruit. With default rates falling and the greenback depreciating relative to the Canadian, New Zealand, and Scandinavian currencies, the fund produced an outstanding return.