Broker Check

How Is The Manager of The Decade Faring?

| May 25, 2017
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Morningstar named Bruce Berkowitz of the Fairholme Fund the 2000-2009 US stock "Manager of The Decade," for a good reason.  The return of the Fairholme Fund from 2000-2009 was +13.2% per year compared to -1.0% annually for the S&P 500!

Alas, past performance of an active manager isn't a reliable indicator of future results.  Since 2010, Fairholme has only returned +7.0% annually through April, compared to +13.1% for the Vanguard S&P 500 Fund and +14.1% for the DFA US Large Value Fund (Fairholme is a "large value" strategy).  Even the "best" eventually flounder.

Maybe, you think, long-time shareholders have still been rewarded?  But the evidence doesn't support this belief.  Morningstar reports that investors in the fund have averaged +4.0% per year over the last 15 years, 4.6% annually less than the fund's return.  It turns out most investors didn't own the fund during its 2000s hot streak but jumped on board after it was named Manager of The Decade.  Almost everyone would have been better off just buying the S&P 500 (+7.5% per year) or the large value asset class (+8.3% per year) over the last 15 years*. By accepting the asset class outcome for what it was going to be, and focusing all effort on sticking with the strategy through thick and thin, you would have fared much better.

*as a part of a more diversified portfolio, of course.

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Past performance is not a guarantee of future results. Mutual fund performance shown includes reinvestment of dividends and other earnings but does not reflect the deduction of investment advisory fees or other expenses except where noted. This content is provided for informational purposes and should not to be construed as an offer, solicitation, recommendation or endorsement of any particular security, products, or services.

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