Scan the list of the worst-performing mutual funds of 2011, and you will run across a slew of formerly highflying fund managers whose picks have crashed and burned, writes the Wall St Journal..
The Fairholme Fund, managed by renowned investor Bruce Berkowitz, has lost more than 27% this year, according to investment-research firm Morningstar. Ken Heebner's CGM Focus has lost more than 22% and Bill Miller's Legg Mason Capital Management Opportunity has dropped almost 35%.
A common thread runs through the failures. Each manager's fund owns fewer than 50 stocks or has more than half of its money tied up in its top 10 holdings. Such so-called focused funds are designed to let star managers shine. Instead of being bogged down in hundreds of stocks, where even a great pick will have only an incremental impact on the fund's return, the manager can home in on the few companies he or she is most excited about.
When those picks outperform, the manager is a hero Morningstar named Mr. Miller "domestic stock fund manager of the year" in 1998. Mr. Berkowitz was "domestic stock fund manager of the decade" in 2010. But just a few lousy picks can cause such funds to plummet….
Find out more at http://online.wsj.com/article/SB10001424052970204774604576629431292949322.html?mod=personal_fin_newsreel
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