Knowledge is power, especially when it comesto financial dealings. The more you know,the better your chances of making soundinvesting decisions. That's the thinking behind a newranking system that evaluates not just mutual fundsbut also fund managers. According to an article in, the new system, called theRankings Service, is based on the career track recordsof mutual fund managers.
Wall Street Journal
Jim Lowell's Fidelity Investor
The system is the brainchild of private investmentstrategist James Lowell who, according to an articlein the , spent 3 years creating thenew service. Lowell, who publishes the independentnewsletter , is quoted asstating, "We are really looking at a sample question.Does this manager add value? And if they do, howmuch do they add?"
According to the article, what theRankings Service does differently than other fundgrading services is that it rates the performance offund managers, not their funds. It creates scores formanagers overseeing multiple funds, and tracks theperformance of managers who change jobs. In addition,it compares the performance of fund managersacross different asset classes, such as small cap stocksand international bonds.
Lowell is no stranger to analyzing mutual funds.He began publishing the independent newsletterabout Fidelity investments in 1998, and through2003 his newsletter portfolio generated an averageannualized return of 10.26%. That compares with a0.5% decline by the S&P 500 index.
There's no question that Lowell's new RankingsService has made an impression, but it has alsodrawn some concerns. Don Phillips, managing directorat Morningstar, concurs that the more angles youcan use to examine an investment, the better you willunderstand it. Fund managers, he points out, are "animportant aspect of understanding a mutual fund."But Phillips also raises the issue that it's difficult toknow who does what at a fund company. If a fundmanager leaves to join another company, they willthen have "an entirely different set of resources,"according to Phillips.
Lowell agrees that resources are important, but healso believes that good managers will rise to the top nomatter what organization they're with. "If it were truethat money and resources made managers," Lowelltold , "then companies like Fidelity,T. Rowe Price, and Vanguard wouldn't have any bottom-ranked managers—but they do." As for team-managedfunds, Lowell says his system attributes thefund's performance to each team member.
According to the Rankings Service, the top threelarge cap growth fund managers are RobertHagstrom Jr of Legg Mason Growth Primary, themanagement team at Jensen Portfolio, and RichardFreeman of Smith Barney Aggressive Growth.
In small caps, the top three managers areAlexander Thorndike of Century Small Cap Select,Carl Wilk of Gartmore Micro Cap Equity, and KarlBrewer of William Blair Mutual Small Cap Growth.On the International Equity side, the top threefund managers are the management team of PearlAggressive Growth, Guenter Easchang of VontobelEastern European Equity, and Jean-Marie Eveillardof First Eagle Global.
The Rankings Service costs $379 a year for quarterlyreports, and $579 annually for reports that areupdated daily. The reports are available at Lowell'sWeb site, www.trsreports.com.