Morningstar’s manager of the year mistake

BY WARREN BOROSON

NEWJERSEYNEWSROOM.COM

BOROSON ON MONEY

Morningstar, the giant publishing house in Chicago, has just announced its mutual fund managers of the year — and really blew it this time.

Instead of naming the clear and obvious choice for domestic manager of the year, Bruce Berkowitz of Fairholme — who was the winner last year, as well as Morningstar's manager of the decade — Morningstar decided to do something unexpected. It named someone less deserving. Specifically, Robert Goldfarb (pictured) and David Poppe of Sequoia.

Fairholme, shares of which I own, has been far superior to Sequoia. In 2010, up 25.5% for the year, up 11.83% for the decade. Sequoia, up 19.5% for 2010, up 5.8% for the decade. Not naming it again is like not naming a particular baseball player as Most Valuable because he happened to have won last year, or not giving someone an Academy Award because he or she got one in 2009.

Unfair.

Trust me, I've got no special reason to favor Berkowitz. Bum used to have offices in New Jersey (Short Hills), then hightailed it down to Florida. Didn't even ask me for a by your leave. And now — curses! — he and his funds are no longer local stories.

I'm happy to report that some of Morningstar's readers are just as disgusted as I am.

Here are some perceptive comments on Morningstar's lame-brained choice:

Rathgar: Berkowitz can't win every year. Just get your money in Fairholme before it closes. He indicated it may close at $25 billion of assets. [Assets recently: $19.4 billion. Minimum first investment: $10,000. Phone: 866-202-2263.]

RJAlpha: Anyone know the alpha for Sequoia? The best fit is -4.82. Nuff said. [Alpha measures how well a fund did, given its riskiness. A positive alpha is good. A negative one, not good.]

RKay48: I suppose you can't pick Berkowitz every year. The choice of Sequoia is certainly defensible, given their long-term record. However, there is no question that Sequoia's performance over the past 20 years has been due to their very large holding of Berkshire [Warren Buffett's company].... Sequoia has been the very antithesis of a diversified mutual fund.

Gowiththeflow: Why can't you pick Berkowitz if he does the best job? ... Nobody has done that well in my lifetime (mid-80s).... Just like Bill Gross [of the PIMCo funds], the man has an uncanny sense of when to make moves. Show me anybody who has done even close for a 10-year period with a market that is the most fickle it has been in over 50 years.

WLudford: Also add Whitney George at Royce as a better choice, along with Berkowitz.

Bitsotree: I'd really like to know what Berkowitz might have needed to do to gain the honor once again. Where did he fall short? Or, conversely, in what ways did Goldfarb outpace him?

Leonardsahn: Failing to choose Berkowitz for domestic manager of the year makes no sense.... He trounced Sequoia in 2010 on performance and often with over 1/3 of his portfolio in cash or bonds.... Look at the 10-year record and decide who you'd rather be with.

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Other choices that Morningstar made: Brent Lynn of Janus Overseas as international fund manager of the year, and Michael Hasenstab of Templeton Global as fixed-income manager of the year.

Warren Boroson will answer financial questions sent to This e-mail address is being protected from spambots. You need JavaScript enabled to view it .