Morningstar Warns Against Overreacting to Fund Manager Changes

A recent study conducted by Morningstar that analyzed returns from actively managed stock and bond funds between 2003 and 2016 found “no relationship between any type of management change and future returns,” according to an article in InvestmentNews. Although management changes get a lot of attention in the media and the investment community (the article cites the example of Bill Gross’s departure from PIMCO in 2014), the study concluded that their occurrence has little if any effect on performance due to the following factors: Seventy-five percent of all actively managed funds are team-managed—”it can generally be assumed that the manager […]

Morningstar: Funds Flow and Liquidity Affect Performance

Two factors that can affect a fund’s performance are the level of fund inflows and the trading impact of that inflow, explains Morningstar’s Russel Kinnel in a recent article. For most funds, writes Kinnel, “the ideal level of money coming in is a small positive inflow. It gives the managers some money to pursue new ideas with but doesn’t force them into significant selling or buying.” Kinnel points out that a large inflow can be problematic because it can be very time consuming for the fund manager and/or can incur high trading costs. Kinnel explains that the “bloat ratio” –which […]

Gabelli, Grantham, Gross & Others Weigh In

A number of top investment strategists offered their opinions about the market and the economy at the recent Morningstar Investor Conference in Chicago, including value fund star (and Benjamin Graham disciple) Mario Gabelli. Gabelli, whose ABC fund posted its first negative returns in 14 years last year — when it dropped just 2% — sees opportunities in the market for long-term investors. “Basically we are very simple: What will the stock market do over the next ten years?” he told MarketWatch.com. His firm thinks gross world profit will grow at about 3% going forward, with inflation of 3%. Margins will […]

Morningstar: Dow Selling at 30% Discount

Morningstar analyst Ann Gilpin says the investment research group believes the Dow Jones Industrial Average is now selling at a 30 percent discount. The Dow’s fair value is about 12,500, Gilpin says, noting that “our coverage universe [is] trading at the steepest discounts we’ve seen since we started valuing equities”. While acknowledging the weakness of the economy and the bloated levels at which stocks were selling before the recent crash, Gilpin says that the backlash against stocks has been too great. “We think Mr. Market has overreacted to the deluge of negative news in recent months,” she says, referring to […]