Some funds need to lower their expenses.
Some funds need to stick to their investment styles.
Some funds just need to be put out of their misery.
I keep a mental list of all the funds that I never want to see again. In some cases, their erratic or purely pathetic performance has worn out my patience. With others, I just want the lame but incessant advertising to stop.
Here is a short list of funds and groups of funds that need to accept the inevitable.
Kaufmann fund's frequent but banal advertising never changes, except for minor revisions of its tagline. I've seen these two managers, Lawrence Auriana and Hans Utsch, so often that I could sketch them from memory. Either retire this fund or at least retire this sad ad campaign.
Sure, when Kaufmann was young and sprightly, it turned in some great performance numbers. Now, this $3.2 billion fund lumbers along. Last year it returned 0.7%. This year the fund is down 1.4%, compared with a 3.9% climb in the
small-cap stock index and a 10.2% rise in the
Plus, this fund carries an atrociously high expense ratio of 1.95%, well above the equity fund average of 1.47%.
Kaufmann's glory days are long gone. Say goodbye.
Bear funds are meant to be safe harbors when the market is doing poorly.
Well, cash is a lot cheaper and won't make you worry about your portfolio losing 34%.
Prudent Bear fund is certainly the best-known one in this group. You would have lost piles of money if you had owned this fund over the past few years. And you would have paid 2.36% in annual expenses for the privilege. (During the third quarter, the fund did rise 16.5%.)
While I'm at it, I'll throw market-neutral funds into this group as well. As the name says, these funds are supposed to be neutral to the moves of the market. Instead, you can call them profit-neutral.
For example, the
Barr-Rosenberg Market Neutral fund is down 10.8% this year, while the S&P is up 10.2%.
If I wanted numbers like that, I could go to Vegas. At least that town puts some fun into losing.
CGM Mutual fund hasn't quite made my list, but it's getting there.
This large-cap fund has spent much of the 1990s trailing its peers. Occasionally, CGM will turn out a great return: 1996 was a good year. So was 1993.
I always say you've got to look at its long-term record. But even that doesn't look so good. Through the end of October, its 10-year annualized return was 12.2%, worse than 91% of its peers, according to
For a manager who has been lauded so much over the years, I expect more.
American Heritage fund is probably best known for its top holding:
, a British company that makes treatments for erectile dysfunction.
Skipping the jokes, this fund's heavy allocation to this one stock, 73.2% earlier this year, has led to consistently inconsistent performance. This year, American Heritage is down 34.2%. Last year it lost 61.2%. In 1997 it was up 75%.
Plus, this single concentrated position takes away most of the reason that people invest in mutual funds, namely diversification.
Some people might call this fund aggressive. I think that's a euphemism for dangerous.
I don't eat in theme restaurants and I don't like theme funds.
Broadly, these funds look like portfolios that were dreamed up by marketing managers rather than money managers. A good gimmick makes a great sales hook.
But a good gimmick also needs to be narrowly focused, something you don't necessarily want with a mutual fund.
In this category you'll find the
fund, which invests in so-called death-care providers like funeral homes and casket makers. Eventually, everyone's got to die. But not necessarily at an appropriate profit margin.
Then there's the
StockCar Stock Index
fund, which invests in companies involved, sometimes peripherally, in NASCAR racing. Many of its holdings are merely well-known companies found in the S&P 500 index.
While auto racing is a fine sport, it's not a true sector of the U.S. economy.
What's next? Rodeo options?
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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.