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Fund Times

Fund Times: Oakmark's Nygren Candid about Fund Struggles

Plus, news on Vanguard going neutral, various fund mergers, and more.

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Some of the best mutual fund managers are often the most candid.  Oakmark Select (OAKLX) manager Bill Nygren showed that with a special letter to shareholders in which he faced up to recent poor performance.

In his letter, dated Aug. 16, Nygren wrote: "The Oakmark Select Fund's performance since the end of the second quarter has been dreadful. Not only has the market declined significantly, but our Fund has fared meaningfully worse." Part of this underperformance, he states, is due to the fund's longstanding position in  Washington Mutual (WM) (nearly 14% of assets), which has suffered significant declines this year due to the fallout from subprime mortgage trouble. Nevertheless, Nygren argues that: "Washington Mutual has taken on less risk in their loan portfolio than their peers have, as demonstrated by the strong credit ratings of their borrowers (FICO scores) and their lower loan-to-value ratios. Further, as a bank, Washington Mutual has much longer term funding than do pure mortgage originators� (and in the end) this difficult period should end up enhancing Washington Mutual's long-term earnings potential." Nygren wrote that even if his analysis of this company's holdings is wrong, he and his team remain committed to their long-term, value-oriented investment style. He also said in an interview that he bought more shares of the fund during its travails.

Lawrence Jones has a position in the following securities mentioned above: OAKLX. Find out about Morningstar’s editorial policies.