Just what makes a top-notch mutual fund company? A recent Morningstar Fund Spy column cites two firms, Dodge & Cox and Primecap, as high-quality fund families, which piqued my interest as I use funds from both for my 401(k) plan clients as well as my individual clients.
Among the positive traits of the two include:
- Fund management teams with long tenures.
- Neither company aggressively markets their funds nor do they invest only in areas outside their respective spheres of competence.
- Both are run by fund managers rather than marketing types.
- Managers invest heavily in their own funds.
- Both keep the fees on their funds low.
- Each have a strong, independent board of directors overseeing their funds.
- Neither has been in regulatory trouble.
Let’s look at the other side of this coin.
Janus was one of the big names in the mutual fund world during the go-go years of the late 1990s. They had a number of top funds with well-known managers. Things started to change with the bursting of the dot-com bubble in 2000 and the ensuing market downturn of 2000-2002, which was fueled in part by the 9/11 tragedy.
Since 2003, when the firm’s founder left, the company is on its fifth CEO. Well-known fund managers such as Jim Craig (Janus Fund), Tom Marsico (Janus Twenty), and Helen Young Hayes (Janus Worldwide) are long gone.
Typifying the situation at Janus is the recent decision to merge Janus Worldwide into another Janus fund pending shareholder approval. Janus Worldwide under Helen Young Hayes was one of the most successful world stock funds of the late 1990s, and boasted a huge a huge asset base of around $44 billion at its peak.
Over the past ten years the fund ranks in the bottom 3 percent of its peer group and has had a number of manager changes. Total assets have fallen to about $1.9 billion.
My point is not to pick on Janus Worldwide or even Janus as an organization. But I suspect that organizational turmoil is at least in part responsible for the severe change in the fortunes of Janus Worldwide shareholders and the underperformance of both the Janus Fund and Janus Twenty over the past five years.
While it is certainly possible for a mutual fund to be a star in spite of being part of an otherwise average or even a sub-par family of funds, there are advantages to be had for funds that are part of a solid family with a culture of stability and excellence.
Roger Wohlner, CFP®, is a fee-only financial adviser at Asset Strategy Consultants based in Arlington Heights, Ill., where he provides advice to individual clients, retirement plan sponsors, foundations, and endowments. Read more about Roger here.