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Rekenthaler Report

The Style Police Were Right

Those stock funds that moved less, profited more.

Speed Traps?
The 1990s were the decade of the "style police." Armed with the new tool of Morningstar Style Boxes, investment professionals surveilled equity funds, to guard against "style drift." Funds that moved from grid to grid were liable to be swapped out of client portfolios, replaced by steadier rivals. Literally and metaphorically, Rudy G. presided over Wall Street. Law and order was in order.

I exaggerate not. Putnam staked its brand on convincing financial advisors that its funds were the industry's most style-pure. Most investment consultants screened funds for style movement, using only those funds that passed the test. Subscribers urged Morningstar to publish style ratings, with the obedient funds branded as "style consistent" and the movers as "style drifters."