Buy the manager, not the fund.
How many times have you heard that? But try to figure out the relative merit of managers in a big investment company who have jumped among several mutual funds in different market conditions over a period of years.
, an independent newsletter that tracks
funds, is taking a shot at it with a system that ranks 29 general equity, 24 sector and 12 international managers. The cream of its crop: Charles Mangum of
Dividend Growth for general equity funds, Yolanda McGettigan of
Select Construction and Housing for sector funds and Kenichi Mizushita of
Japan Small Companies for international funds.
The irony of the list is that it won't necessarily lead you to funds that even
editor James Lowell would recommend. A terrific sector fund manager investing in a down-and-out industry doesn't make sense. Ditto for funds investing in specific areas of the world. It's not even a sure thing among general equity funds:
maintains a sell recommendation on Fidelity
Fifty, managed by its No. 2-rated manager, John Muresianu.
So the rankings have limitations, even if you accept them at face value. But we have a hard time resisting a list that tries to rate managers based on more than just their funds' percentage returns.
list measures risk-adjusted relative performance, blending results for the last three years with performance over an entire career. In the end the calculations generate a number, representing the annual outperformance or underperformance of a manager.
Younger managers have a better opportunity to shoot to the top or sink like a rock because their three-year performances and lifetime returns are more or less the same thing. But fewer young managers than you might think made it to the top of the general equity rankings.
In most cases,
selected different benchmarks than those used by Fidelity itself to generate a relative performance figure. For example, it uses the
, not the
, to measure performance at
Magellan. And Rich Fentin's performance at Fidelity
Value was measured by two different
value stock indices, representing different blends of mid- and large-cap equities.
Alternative benchmarks became even more important in sector funds. For example, the most popular automotive stock indices give U.S. car makers as much as an 80% weighting. But Fidelity
Select Automotive and most other funds investing in the industry put most of their money in parts companies.
Mangum was a surprisingly easy winner in the general equity group. Dividend Growth is coming off a terrific 1998, when it earned 35.9%. But Mangum also racked up big points under the
system when he managed two Fidelity Select funds,
Health Care and
Medical Delivery, in the early to mid-1990s. He suffered modestly negative numbers running Fidelity's
Convertible Securities fund in 1995 and
OTC in 1996.
Muresianu is easily the biggest surprise on this list. Muresianu has spent his Fidelity mutual fund career running utility sector funds, and he hadn't even been doing that for a year when he was named the new manager of Fidelity Fifty earlier this month.
Whether credentials as a good utility investor mean a manager will do well running a concentrated general stock portfolio remains to be seen. But
maintains its sell recommendation on the fund, mostly because Lowell doesn't care for concept funds and distinctly dislikes this one (investing in top 50 stock ideas, an idea from which Fidelity Fifty managers have often strayed).
"I wouldn't be rushing out to buy Fifty just because he's on board," said Lowell. "But it's probably the first time I'll pay some attention to it."
Muresianu has turned in some eye-catching numbers at Fidelity Fifty, already gaining 7.7% for the year to date through last week. Another Fidelity watcher, Eric Kobren of
, believes the fund soared because it had moved about 20% of the portfolio into Internet-related stocks. Fifty had actually bolted out of the gate this year with returns of more than 15% in early January but has since settled back down as Internet stocks cooled a bit.
The older Fidelity veterans tended to hold their own. Magellan's Bob Stansky ranked fourth on the general equity list.
Contrafund's Will Danoff was eighth, ahead of
Destiny's George Vanderheiden (12th) and Fidelity
Fund's Beth Terrana (13th).
The biggest surprise near the bottom of the list: Value's Fentin, who finished 26th in the general equity field of 29 managers.
Overall, 14 of the 29 managers finished with a positive rating and one,
Growth Company's Steven Wymer, just missed with a negative. That means about half of the managers outperformed the benchmarks
selected for them. And batting .500 in this league makes you an all-star.
"You can say that Fidelity managers are significantly good at what they do," said Lowell. "Then there are the more problematic concerns that some managers bring to the table."
Steven Syre & Steve Bailey write for the
. This column is exclusive to
. Under no circumstances does the information in this column represent a recommendation to buy stocks or funds.