We noted the challenge mutual fund investors face in trying to identify funds from small, independent, entrepreneurial money managers. Lo and behold we came across a handful of items that highlight a couple of additional themes.
Research has shown that it may advantageous for money managers to be located outside of the major money management locales, like New York City and Boston. This may be due in part that these managers can more easily avoid the problem of “groupthink.” Nicole Bullock and Rob Wherry in SmartMoney (via WSJ.com) identify five funds whose managers are located far from any money center.
Another screen investors could use would be to focus on quantitative managers. While quantitative techniques are no panacea, they can, like location, provide some insulation from some of the psychological issues faced by all portfolio managers. Zubin Jelveh in the New York Times notes the growing profile of many quantitative managers. However for the moment good old fashioned discretionary mutual mangers still rule. Jelveh notes that quantitative funds in addition to being able to analyze a broader universe of securities, also have a tendency to be better risk managers. Some specific funds are mentioned in the article.
Tim Gray also in the New York Times profiles a quantitative money management firm, Bridgeway Funds. Despite some controversy Bridgeway has demonstrated strong performance across their equity funds. Gray notes that Bridgeway’s techniques are proprietary and are therefore closely guarded. Therefore an investment in a Bridgeway fund is a bit of “leap of faith.” In any event the article provides a good overview for investors who might be interested in investing in any of their funds.
We recommended that investors stay alert to news on new and novel mutual funds. While we cannot recommend any of the funds in these articles, it is interesting to note that only one day later we came across some interesting items. It just goes to show you that good things come to those who wait – or something like that….