Investing Classroom: Measuring Manager Skill

Portfolio lesson 5.7: How talented are fund manager "stars" and how important is a name?

Morningstar 20 May, 2010 | 11:18AM

The fund landscape is littered with former "star" managers. Oakmark Fund manager Bob Sanborn crushed his peers in the early 1990s, but was "reassigned" in 2000 after posting poor relative returns in the late 1990s. Kinetics Internet Fund gained a phenomenal 196% in 1998 under manager Ryan Jacob; at Jacob Internet Fund in 2000, however, Jacob disappointed, as the fund lost 79% of its value.

That begs the question, How talented were these "stars" in the first place?

There's no easy way to figure out whether a fund manager is a gifted stock-picker who can keep it up or merely a lucky one who was in the right place at the right time. But that doesn't stop investors from trying.

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