Tuesday, September 27, 2011

How Have the Market Titans Fared This Year?

Anyone thinking about investment geniuses of the past 15, 20 or 25 years would readily offer up the names Bill Gross, Ken "Bigfoot" Heebner, Bruce Berkowitz, and Bill Miller. Each is known for long-term market beating results so we aren't talking about flashes in the pan here. But how have these market titans fared this year compared to the indexes? As of the close of the market yesterday their year to date results lagged the indexes:

Heebner and Berkowitz run very concentrated funds and their performance can often greatly exceed the market when their bets pay off. They and Miller have bet heavily on financials, a bet that might yet pay off but they were obviously early taking their position. In the bond market, Gross decided to bet against US Treasuries even as the Fed was actively trying to drive down show term interest rates to near zero (I can sympathize with his thinking because sooner of later the Treasury bond bubble is going to burst). Even the best and the brightest in the investment world are subject to underperformance for stretches of time-- whether it's due to poor security selections, asset bloat, reversion to the mean, or hubris. Whether these titans performance will return to legendary levels, only time will tell. In the meantime, investors could have beaten their recent performance simply by investing in index funds. Who'd have thunk that?

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