All-Star Managers Fail to Make This Year's Cut

These are, after all, some of the most successful investors of the past decade. They've each beaten the S&P by factors of two or even three over that time.

So what's going on? OK, so there are individual issues with individual funds. Miller, for example, is counting the cost of sticking by Amazon.com (AMZN Quote) and Sprint (S Quote), both of which are down in a rising market. And Whitman has been hurt by typically idiosyncratic bets on Florida homebuilder St. Joe (JOE Quote) and on some distressed bonds.

But with apologies to Leo Tolstoy, a lot of these unhappy funds look pretty much alike. Danoff, Daftary, Nygren, Whitman, and Rodriguez: They had all turned cautious on the market by early summer and were caught holding too much cash, and too few stocks, when the market suddenly took off in August.

In some cases, those cash holdings were huge. Rodriguez's position was as high as 32% at one point and Manu Daftary's nearly 50%. "We were caught with our pants down," Daftary admitted when we spoke a few days ago. "I'm pretty upset about it. But the only thing you can do when that happens is to pull your pants up -- and get moving."

He plunged in during September to trade the rally and, like most of the star managers, has been making up ground as a result. But the manager is still bearish and holds 20% in cash. He predicts the economy may even head into a recession next year.