Heebner, Berkowitz, and Miller: Mutual Fund Underachievers

By on June 28, 2011

Ken Heebner, Bruce Berkowitz and Bill Miller, heralded as super investors, have seriously lagged the market so far this year. Funds run by these three “luminaries” were recently reported to have negative returns, while the S&P 500 was up modestly. Heebner, Berkowitz and Miller are struggling to avoid being amongst the worst performing funds of the year.

Popular media outlets have traced the lagging performance to bad bets placed on the belief in a strong economic recovery. Miller and Berkowitz wagered their investors money on financial companies, while Heebner bought into the recovery of the automakers.

Bad speculations by these fund managers are only part of the problem. Funds run by these three enjoyed massive popularity in the not-so-distant past. The accolades and five star ratings result in massive inflows of investment dollars. Most of this flood of money was heaped on them after the stock market’s multi-year run of good performance. The managers were therefore forced to pay above average prices for many of their investments. It is for this reason that investing in funds run by the “all stars” is best avoided.

In fact, investing in actively managed funds is an ill-advised strategy for wealth accumulation.

3 Comments

  1. Car Tuning

    June 29, 2011 at 2:06 am

    Thanks for the stock market tips!

  2. Berry McCaulkiner

    June 29, 2011 at 2:27 pm

    I avoid actively managed funds with one exception. Low cost funds that allow for no-fee, automatic investing. This allows you to dollar cost average effectively. Try investing $150 every other week in a stock or index fund. That said, in the long run, even this is probably a wash.

    • Don Keedix

      June 30, 2011 at 5:04 pm

      Vanguard allows the same for their funds if you have an account with them.

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