Morningstar: Managers of the Year

01/16/2004 12:00 am EST

Focus:

Russel Kinnel

Editor, Morningstar FundInvestor

"The importance of putting shareholders first certainly takes on greater meaning at a time when the mutual fund industry is up to its neck in scandal," says Russell Kinnel of Morningstar. "So, while we call it our Manager of the Year awards, they encompass a lot more. Here, are our three winners for 2003."

Domestic-Stock Managers of the Year: Howard Schow, Theo Kolokotrones, and Joel Fried Vanguard PrimeCap (VPMCX) and Vanguard Capital Opportunity (VHCOX)

"We chose these managers over a number of strong candidates because they represent everything you’d look for in a manager. They apply a rigorous fundamental approach that takes them on a slightly different path from other managers. Using a contrarian growth strategy, they have a knack for making a killing in out-of-favor growth stocks. Most importantly, they’ve made a lot of money for a lot of people over a long period of time. The funds weathered the bursting bubble much better than their peers did in 2000 because management didn’t lose sight of fundamentals. Sept. 11, 2001, presented a different sort of challenge as management held a number of airline and hotel stocks. Rather than panicking, they culled only the weakest holdings and held on to the others, which earned nice returns when they rebounded. Willingness to own biotech, telecom equipment, and tech stocks in 2003, three years into a brutal bear market, proved quite profitable. These managers have been runners-up in the past, but it’s high time this crew takes home the prize.

International-Stock Manager of the Year: Bill Fries
Thornburg International Value (TGVAX)

"Fries joins a growing list of managers who have successfully transported their investment process to overseas markets. Mutual Series has done it. Longleaf has done it. Tweedy, Browne has done it. And now Fries. Fries runs a concentrated portfolio that features dividend-paying blue chips and higher-risk plays on stocks with attractive growth prospects. Fries invests in a wide range of market capitalizations and markets. The fund currently has a hefty 25% weighting in emerging markets. Combined with the portfolio’s concentration into about 50 names, that emerging markets angle makes this fund one of the boldest international-stock funds around. Remarkably, this fund performed well in every environment it has faced since it was launched in 1998. In every single calendar year, it has landed in its category’s top decile. That’s no small feat considering that those years encompass huge swings between growth and value, the dollar versus other key currencies, and large caps versus small.

Fixed-Income Managers of the Year: Fidelity’s Municipal Bond Team
Fidelity Spartan Municipal Income (FHIGX)

"I never expected to write this: Fidelity’s muni funds are the best part of Fidelity. They used to be an afterthought at a company run by and for stock-pickers. But Fidelity wised up and brought in some folks who have engineered one heck of a turnaround. The funds avoid big bets and simply try to add value through a bunch of small bets on issues and sectors. So, you get low costs, great research, and very dependable funds. The muni group now ranks as probably the best around because many institutional heavyweights like PIMCO and Western Asset are mainly focused on taxable bonds. Only a few firms have the scale with retail investors to build as strong a muni group as Fidelity has. The proof is in the results. All 15 of those with five-year records are in their category’s top decile for the trailing five years."

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