The top 3 funds on the spreadsheet sorted by year-to-date (YTD) return are Kinetics Internet (WWWFX) up 38.47% YTD, Virtus Zevenbergen Innovative (SAGAX) up 36.58% YTD, and Artisan Mid Cap (ARTMX) up 33.95% YTD. Here’s how I look at each of them.
Murray Stahl has been at the helm for 18 years. For the last 10 years, he has beaten his category benchmark by 0.26% a year — including the past 6 months of stellar returns. If you invested $10,000 in this fund 10 years ago, you would have beaten the category benchmark by $263.06. Beating his benchmark for 10 years is an achievement for Stahl, but the outperformance is not enough to make a difference for investors.
Virtus Zevenbergen Innovative
Brooke de Boutray has managed this fund for 11 years. Over the last 10, she beat her category benchmark by 3.21% a year which translates to an additional $3,715.69 return on a $10,000 investment over 10 years — that’s more like it. The only problem is the fund has a hefty 5.75% load. Although the manager has proven her skill, I would prefer not to pay a load unless there was no other alternative.
Artisan Mid Cap Investor
James D. Hamel has managed the fund for 10 years, outperforming his benchmark by 1.19% a year which means Hamel added $1,255.79 over 10 years on a $10,000 investment on top of the benchmark return.
My Take: The best evidence of a manager’s skill is the margin of outperformance over a market cycle (10 years minimum). The bigger the gap between the manager’s return and the benchmark the more confident you can be of a manager’s skill.
Stahl’s outperformance of 0.26% a year, is better than about 98% of mutual fund managers, but it is not large enough to be compelling. I leave him on the spreadsheet because he may be the best one available in many 401k plans, but he would not be among my top choices.
Even when a great manager outperforms by a large margin (as Boutray did) the fund company can make it a bad choice for investors by loading up the fees. I leave Boutray’s fund on the spreadsheet, because a lot of 401k plans only offer load funds. In that case, Boutray’s fund could be your best choice, even if it would not be among my top choices.
Hamel’s Artisan Mid Cap Fund is the best of these three, but there may be others what have performed slightly less well year-to-date but with much bigger margins over their benchmark for the past 10 years. There is a trade-off to make between recent returns and long-term returns. I will do a deep dive on this next time.
Click here to download the most recent spreadsheet listing all the funds that passed muster.
To see previous articles in this series, click here.