January 14, 2015
Barron's: Arik Ahitov quoted in cover story, 1/12
Arik Ahitov comments in the cover story of this week's Barron's on active management ("Return of the Stockpickers: Reports of the death of active fund management are greatly exaggerated. In fact, it's likely to do quite well again if interest rates go up," p. L7, by Sarah Max).
See the excerpt below, followed by the full story; online by clicking here.
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When John Templeton said, "The time of maximum pessimism is the best time to buy," he probably wasn't thinking that his tenet might one day refer to his own industry. Yet, for active mutual fund managers, 2014 was a point of maximum pessimism.
While the Standard & Poor's 500 returned 13.7% for the year, stockpickers struggled to keep up. Just 19.9% of U.S. equity fund managers bested their benchmarks, according to Morningstar -- but those who did managed an advantage of 1.8 percentage points, on average. Specialists, such as sector and alternative funds, also struggled, with 33% and 25%, respectively, beating their benchmarks.
As more money moves into the indexes, it could create more opportunity for stockpickers. "It becomes a self-fulfilling prophecy," says Arik Ahitov, co-manager of $1.2 billion FPA Capital (FPPTX). Ahitov says more than a quarter of the companies in his bogey, the Russell 2500, have net negative income. "You have all of these unprofitable companies going up, and nobody seems to care. An index fund doesn't distinguish between what is and isn't profitable. Everything moves together." His fund has averaged 14.4% annual gains since 1984, versus 11.9% for its benchmark. But, like many deep-value funds with large cash positions -- recently 28% of assets -- it has lagged behind lately, last year by nearly six percentage points.
The views expressed in this story are those of the author at the time created. They do not necessarily reflect the views of the Fund, Advisor, or the Distributor. These views are subject to change at any time based on market and other conditions, and the Fund, Advisor, or the Distributor disclaims any responsibility to update such views. No forecasts can be guaranteed. These views may not be relied upon as investment advice or as indication of trading intent on behalf of any FPA portfolio or the Distributor and should not be construed as an offer to sell or a solicitation of an offer to buy securities or any product mentioned in this article. This information and data has been prepared from sources believed reliable. The accuracy and completeness of the information cannot be guaranteed and is not a complete summary or statement of all available data.