Fund Managers Who Spit Out Their Own Cooking

A couple of months ago, I wrote about the predictive power of manager investment and highlighted some funds where managers had raised their investment levels. Today, I’ll look at a few funds where managers have gone the other way.

I found four managers at six funds who formerly had more than $1 million of their own money in their funds but have sold their positions completely. In most cases, the fund companies did not provide an explanation. There are some plausible excuses, such as divorce or home purchases, to explain why they might have sold their holdings.

Other possible reasons could include managers moving their money to other funds that they think focus on a more appealing asset class. Still, it’s pretty discouraging to see managers selling the following funds, all of which have some appeal.

PIMCO Floating Income PFIAX and PIMCO Diversified Income PDVAX

Curtis Mewbourne had more than $1 million in both of these funds, and now he has nothing. I don’t know what he did with his money, but it isn’t in his other fund. He has zero investment in PIMCO Emerging Multi-Asset PEAAX.

Wells Fargo Advantage Small/Mid Cap Value SMMVX and Wells Fargo Advantage Small Cap Value SSMVX Charles Rinaldi sold his entire stake in both of these funds, which he has managed for years. Wells Fargo said the longtime lead manager did so for estate-planning purposes. That makes me wonder if he is nearing retirement; he's now likely in his 70s, as he graduated from college in 1965. I'd feel better if his comanagers showed more enthusiasm for these funds. Michael Schneider has investments in both in the $10,001–$50,000 range, and Eric Astheimer has nothing in either fund.

Scout Unconstrained Bond SUBFX Mark Egan quickly ramped up to more than $1 million in the fund after it was launched in 2011, but then he sold his shares. The latest filings don't show Egan investing in any of the six funds he comanages. However, Scout said Egan took the money out for tax reasons and later invested the bulk back into this fund. In addition, comanagers Thomas Fink and Todd Thompson each have more than $1 million in this fund.

Fund Company Mistakes

In researching this article, I heard from Wells Fargo that it had erred in its filing for

Also, Hartford owned up to incorrectly saying that Ed Bousa had no investment in

At Forward High Yield Bond AHBAX, Steven S. Michaels was shown as moving from more than $1 million invested to nothing. However, the firm said he has consistently had about $500,000 in the fund, which would mean neither of the past two filings was correct. All of this illustrates the wide disparity of importance that fund companies place on manager investment.

Update: The afternoon this article was published, PIMCO filed an updated Statement of Additional Information that showed Curtis Mewbourne had $500,000-$1 million in PIMCO Diversified Income and $100,001-$500,000 in PIMCO Floating Income. The data is as of March 31, 2015. Mewbourne also has $100,001-$500,000 invested in the PIMCO Diversified Income ETF.

Correction: Because of an error in Morningstar’s database, we incorrectly reported that Josef Lakonishok had sold his investment of more than $1 million in LSV Small Cap Value LSVQX. However, a review of the fund’s SAI from 2013 shows that he did not invest in the fund in either 2013 or 2014.