Sometime back in the 1990s my financial adviser and I were discussing an investment in the Fidelity Contrafund, a high-performing mutual fund helmed then — and still — by the legendary Will Danoff.
I can’t recall exactly, but I expressed some misgivings about the fund’s fees.
“You’re buying Will Danoff,” my financial adviser said.
I didn’t know if that was a company or an individual. I do now. Danoff is still running the $100-billion-plus Contrafund, making him one of the few big names left from the 1960s through 1990s golden era, when investors were drawn to actively managed mutual funds based on a star money manager.
We are talking here about Peter Lynch and Jeffrey Vinik, respectively, of Fidelity’s Magellan Fund, John Neff of Vanguard’s Windsor Fund (which I owned for years) and, more recently, Pimco’s Bill Gross.
They are a vanishing species.
Danoff notwithstanding, the era of the mutual fund solo star has been greatly reduced as research teams — with sophisticated analytical tools — have taken their place. In most instances, those teams provide a deep bench that can take over without missing a step.
Morningstar investment research firm last week issued a report saying the same thing and adding that fund managers just don’t matter that much anymore.
Since the 1990s, “75 percent of actively managed U.S. equity and fixed-income funds are run by teams,” according to Morningstar. “The remaining 25 percent may have a single manager listed, but are assumed to be supported by a research staff with strict processes and restrictions for what stocks fit into their narrow mandate.”
“If your research team has a staff picking stocks based on x, y and z, you will find when there is turnover on the management team, the fund or the process comes to the same conclusions,” said Madison Sargis, one of the report’s authors. “These days, a fund at an asset…