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These Fund Managers Don’t Eat Their Own Cooking

They don’t have a penny invested in the funds they manage.

Mutual funds artwork
Securities In This Article
Loomis Sayles Investment Grade Bond A
(LIGRX)
Harbor Small Cap Value Instl
(HASCX)
Loomis Sayles Strategic Income A
(NEFZX)
Western Asset Core Plus Bond I
(WACPX)
Western Asset Core Bond I
(WATFX)

Since 2004, asset managers have been required to disclose portfolio manager ownership in funds. By investing in their own funds, managers signal that they believe in their process and therefore the long-term prospects of the fund.

Many of the top actively managed funds feature managers with high levels of personal investment, but there are some good funds that lack manager ownership. Let’s look at four of those funds.

Western Asset Core Plus Bond WACPX and Western Asset Core Bond WATFX sport five experienced managers, and not one is invested in either fund. These funds, which have Morningstar Medalist Ratings of Bronze, have historically been highly regarded by Morningstar analysts and had $32.5 billion in combined assets as of May 2024, so it is perplexing that there are no managers invested—not even the longest-tenured manager Mark Lindbloom, who joined the funds in December 2006.

Both funds have distinguished long-term records, achieving top-quintile returns in their respective intermediate core-plus bond and intermediate core bond Morningstar Categories over the trailing 15 years through May 2024. The team’s thoughtful relative value approach to security selection and diligent macro research give these funds an edge, so it would be nice to see the managers back their time-tested process by investing in the funds.

Portfolio managers Matthew Eagan and Brian Kennedy joined Silver-rated Loomis Sayles Strategic Income NEFZX in 2007 and 2016, respectively. The strategy underwent a generational change when longtime managers Daniel Fuss and Elaine Stokes retired in March 2021 and February 2024, respectively. Eagan was co-head of Loomis’ Full Discretion team with Stokes and is now the sole lead. He and comanager Kennedy are well-equipped to continue leading the fund. The managers benefit from one of the largest analyst teams in the industry. They oversee a flexible process focused on corporate credit and can shift allocations up to 40% in high-yield bonds and 20% in equities. It makes for an aggressive approach that can lead to greater volatility, but the managers have proved they can wield the leeway afforded to them. The fund’s 5.3% annualized return over the trailing 15 years through May 2024 beat the multisector bond category average of 4.7% and 67% of peers.

Eagan and Kennedy do not have ownership in this fund but do in other funds they manage, such as Loomis Sayles Bond LSBRX and Loomis Sayles Investment Grade Bond LIGRX. They are strong managers with a solid process and deep supporting resources, but seeing some level of investment in Loomis Sayles Strategic Income would be welcome.

Paul Viera founded Earnest Partners in 1998 and has served as Harbor Small Cap Value’s HASCX lone portfolio manager since its 2001 inception. Earnest acts as subadvisor on the fund, and though Viera is the only listed manager, his nine-person investment team brings unique experience from various industries like defense and logistics, semiconductors, microbiology, and engineering. These industry experts use their knowledge to pick winners within the industries they cover. Their distinctive approach involves using a proprietary model to screen the Russell 2000 Index for stocks primed to outperform based on quantitative factors before conducting deep fundamental research on the stocks that pass the screen. The fund outpaced the average small-blend category peer and the Russell 2000 Index alike, annualized from inception through May 2024.

Given the fund’s success and Viera’s tenure of nearly 25 years, his lack of ownership is a head-scratcher. It is also unclear if and how much the rest of the investment team invests in the fund.

This article first appeared in the May 2024 issue of Morningstar FundInvestor. Download a complimentary copy of FundInvestor by visiting this website.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Stephen Margaria

Manager Research Analyst
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Stephen Margaria is a manager research analyst for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He covers multi-asset and alternative strategies.

Before joining Morningstar in 2022, Margaria worked as a trader/research analyst for SOL Capital Management, where he traded stocks, bonds, mutual funds, exchange-traded funds, and currencies in high-net-worth client accounts and provided market and investment-specific research. Prior to that, he was a client services associate at HB Retirement, where he was part of a team that provided financial planning and investment services to individual clients. Additionally, he worked with the investment team to develop a target-date fund analysis tool and administer the firm's model portfolios.

Margaria holds a bachelor's degree in economics from Kenyon College. He is also a Level III candidate in the Chartered Financial Analyst® program.

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