Over the past week or so, readers have weighed in on myriad subjects: former star managers, the efficient-market theory and the
Web site among them. It's been a veritable goulash of topics. Let's take a look at some of the mail:
wrote to add one name to my
list of hot-ticket managers who ventured out on their own: Art Bonnel of the
Bonnel Growth fund.
Bonnel is the former manager of the
MIM Stock Appreciation
fund. The name probably doesn't sound any bells, but in the early '90s, its returns garnered plenty of attention.
In 1991, this fund returned a stunning 77% compared with 30.5% for the
. That one splendid year helped give Bonnel a solid record for his time on the fund. (MIM's mutual funds were bought by
in 1995, and the fund now exists as the
Riverfront Small Company Select fund.)
But like many a TV star who has quit a hit series to do movies, Bonnel discovered that fantastic performance in one venue doesn't necessarily translate into immediate popularity in another.
In 1994, Bonnel started the Bonnel Growth fund. He runs the fund out of Reno, Nev., for
U.S. Global Investors
, which is based in San Antonio. The company offers a variety of no-load funds that invest in areas ranging from gold and real estate to Asia.
Since starting his own mid-cap-biased quant fund, Bonnel's track record has been mixed. In 1996, the fund's 27.9% return easily beat the S&P 500's 23% rise, but the following year, he trailed the benchmark by more than 23 percentage points. His three-year average annual return of 23.7% dramatically trails the
Vanguard 500 Index fund's return of 31.2%.
Bonnel has only about $125 million in the fund. But so far this year, he is ahead of the index by a couple of percentage points. If he can keep that up, maybe investors will pay closer attention.
Index Fund's Foundation
In my recent
column about the index-like funds at
Dimensional Fund Advisors
, I mentioned that this exclusive firm's approach starts with the efficient-market theory, the same hypothesis that is the basis for index investing. That is, the average investor can't consistently outperform this relatively efficient, fairly priced market by picking stocks.
John Van Der Wal
wrote in to disagree: John "Bogle himself will tell you that this is not correct. Indexing yields more because turnover is much less, saving transaction costs and deferring taxes. These cost and tax-deferral issues cause indexing to outperform diversified active funds regardless of whether the market is efficient."
Well, it's no accident that the first index funds started appearing in the mid-1970s,
the idea of the efficient-market theory was advanced by the likes of Eugene Fama and Burton Malkiel in the 1960s and early 1970s.
But we're really talking about two different points of the same issue.
I'm not about to speak for Bogle, so I called
Bogle is on vacation, but I did get to talk to Jim Troyer, a principal in the firm's core management group. He says we're both right.
The efficient-market theory, or EMT, suggests that, "on average, an investor's ability to predict the future or have access to information is no better than the markets as a whole," says Troyer. So the idea of indexing
based in the EMT.
"But you can do better by minimizing your costs," Troyer adds. With an index fund, investors are not picking stocks, but instead they are buying the market and reducing costs.
You can sum up both points by saying this: Over time, you can't do any better than anyone else except on cost.
A Second Opinion
Last week, I took
to task for not understanding how to use the Internet -- something I found particularly confounding given the fact that the firm is a no-load company that sells its funds directly to the public.
Someone came forward to second that notion.
Web Pages That Suck.com, says the folks at Janus "don't get the Web. In fact, their older site made the Daily Sucker at Web Pages That Suck, and we use it in our speeches as an example of someone who doesn't get the Web. Their old Web site looked like it belonged to a mountain bike company instead of a mutual fund company."
OK, Janus does have a relatively new site, and the firm did away with the mountain-biking and skiing motifs. But how about delivering some annual and semiannual reports on the site?
And by the way, the firm
hasn't posted the top-10 holdings for its
Global Technology and
Global Life Sciences funds. The site now says mid-August. But you can always read my previous story, which contains the list of top holdings.
Send your questions and comments, along with your full name, to
Dear Dagen aims to provide general fund information. Under no circumstances does the information in this column represent a recommendation to buy or sell funds or other securities.