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Fund Spy

Fund Managers Who Spit Out Their Own Cooking

These portfolio managers once had more than $1 million invested in their funds; now they have nothing.

A couple of months ago, I wrote about the predictive power of manager investment and highlighted some funds where managers had raised their investment levels. Today, I’ll look at a few funds where managers have gone the other way.

I found four managers at six funds who formerly had more than $1 million of their own money in their funds but have sold their positions completely. In most cases, the fund companies did not provide an explanation. There are some plausible excuses, such as divorce or home purchases, to explain why they might have sold their holdings.

Other possible reasons could include managers moving their money to other funds that they think focus on a more appealing asset class. Still, it’s pretty discouraging to see managers selling the following funds, all of which have some appeal.

 PIMCO Floating Income (PFIAX) and  PIMCO Diversified Income (PDVAX)
Curtis Mewbourne had more than $1 million in both of these funds, and now he has nothing. I don’t know what he did with his money, but it isn’t in his other fund. He has zero investment in PIMCO Emerging Multi-Asset (PEAAX).

Wells Fargo Advantage Small/Mid Cap Value (SMMVX) and Wells Fargo Advantage Small Cap Value (SSMVX)
Charles Rinaldi sold his entire stake in both of these funds, which he has managed for years. Wells Fargo said the longtime lead manager did so for estate-planning purposes. That makes me wonder if he is nearing retirement; he’s now likely in his 70s, as he graduated from college in 1965. I’d feel better if his comanagers showed more enthusiasm for these funds. Michael Schneider has investments in both in the $10,001–$50,000 range, and Eric Astheimer has nothing in either fund.

Scout Unconstrained Bond (SUBFX
Mark Egan quickly ramped up to more than $1 million in the fund after it was launched in 2011, but then he sold his shares. The latest filings don’t show Egan investing in any of the six funds he comanages. However, Scout said Egan took the money out for tax reasons and later invested the bulk back into this fund. In addition, comanagers Thomas Fink and Todd Thompson each have more than $1 million in this fund.

Fund Company Mistakes
In researching this article, I heard from Wells Fargo that it had erred in its filing for  Wells Fargo Advantage Absolute Return (WARAX). The firm had incorrectly reported that manager Ben Inker had more than $1 million invested, and then the next filing said he had nothing. Wells Fargo said he never had anything in the fund and just had money in the GMO fund that the Wells Fargo fund invests in. It’s a telling story, as Wells Fargo layers on additional fees, and investors in the underlying GMO fund have enjoyed better performance thanks to lower fees.

Also, Hartford owned up to incorrectly saying that Ed Bousa had no investment in  Hartford Dividend and Growth (IHGIX). In fact, the firm said that the manager still has more than $1 million invested in the fund.

At Forward High Yield Bond (AHBAX), Steven S. Michaels was shown as moving from more than $1 million invested to nothing. However, the firm said he has consistently had about $500,000 in the fund, which would mean neither of the past two filings was correct. All of this illustrates the wide disparity of importance that fund companies place on manager investment.

Update: The afternoon this article was published, PIMCO filed an updated Statement of Additional Information that showed Curtis Mewbourne had $500,000-$1 million in PIMCO Diversified Income and $100,001-$500,000 in PIMCO Floating Income. The data is as of March 31, 2015. Mewbourne also has $100,001-$500,000 invested in the PIMCO Diversified Income ETF.

Correction: Because of an error in Morningstar’s database, we incorrectly reported that Josef Lakonishok had sold his investment of more than $1 million in  LSV Small Cap Value (LSVQX). However, a review of the fund’s SAI from 2013 shows that he did not invest in the fund in either 2013 or 2014. 

Russel Kinnel does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.