Newspaper article The Christian Science Monitor

When Active Management Means Many Managers

Newspaper article The Christian Science Monitor

When Active Management Means Many Managers

Article excerpt

Like those amoeba you learned about back in high school science class, mutual-fund managers are multiplying.

It's not just new managers for new funds. But also co-managers, multiple managers, managers who are also analysts, and managers of managers.

The Master's Select Equity fund, for example, has six managers. The Franklin Templeton Dynatech Fund has two managers, though last year it had three. The Stein Roe Young Investor Fund has two managers.

The State Street Research Galileo Fund has at least 14.

"A few years ago, funds were reluctant to admit that they used more than one manager on a fund," says an analyst with Morningstar Inc., a financial-services information firm in Chicago. "They didn't want you to know that the fund had more than one person running the show.

"Now that has all changed, as the concept of multiple managers has become popular," she says.

According to Morningstar, some 1,398 single-class equity funds out of a total of 2,691 single-class funds, or 52 percent of the total, now have multiple managers. Of the 2,731 single-class international equity funds tracked by Morningstar, some 1,297, or roughly 47 percent, have more than one manager.

Reasons for using multiple managers vary. The three most-common ones:

Diversification Having more than one manager enables a fund to broaden its portfolio base by using experts familiar with certain segments, or subsegments, of the market.

Better leadership When manager A is out of town, manager B, or C, or D can run the show. As a result, investors should sleep better, knowing there is always someone on the deck of the ship.

Marketing Let's be honest. Some fund companies use multiple managers "as a marketing gimmick," touting the concept in their advertising, says the Morningstar analyst.

Perhaps the best-known group to use more than two managers is Litman/Gregory Fund Advisors, which runs two highly successful funds: the Masters' Select Equity Fund and the Masters' Select International Fund.

Both funds are up more than 100 percent since their inception in the late 1990s, notes John Coughlan, chief operating officer of Litman/Gregory Fund Advisors, based in Orinda, Calif. …

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