11/30/2023 0 Comments Shearson lehman smith barneyThat claim was correct 32 years ago, when Don made it, and it will be correct for the next 32 years, as well. Organizations that stand by the funds that they offered, year after year, decade after decade, will do their shareholders proud. In summary, although predicting individual fund performances is very difficult, forecasting the fortunes of fund companies is not. (Well, at least among traditional mutual fund providers the advisors might also mention ETF managers BlackRock BLK, Schwab SCHW, or State Street STT, which failed to make the obsolete-rate cut.) Were one to survey veteran financial advisors, asking them to name the five best fund companies, this would likely be their very list. None of the other families should surprise, either. The top finisher is familiar, eh? Thirty-two years later, the obvious choice from 1990 continues to excel. Not all good organizations are abstemious, but those organizations that are abstemious are good. That forbearance remains a sign of quality. Several leading fund providers rarely liquidate their creations. The good news: While today's marketplace possesses no equivalent of Dean Witter (hurrah!), it does contain companies that behave at least somewhat in the spirit of American Funds, including (duh) American Funds itself. More recently, high shutdown rates have tended to come from firms rationalizing their lineups after acquisitions. However, most such businesses have since exited the industry. In 1990, fund liquidations consistently signaled trouble because providers closed funds that they themselves had created. Nor is a high termination rate always bad. Companies that expand into additional marketplaces often have no choice but to launch fresh funds. That holds particularly true from a global perspective. I selected the death rate rather either the birth or overall rates because, while creating many new funds can be a sign of desperation, with marketers throwing new products against the wall to see what sticks, the effort can also be justifiable. (Those who wish to learn more should turn either to the paper itself, or await a summary of its findings, which will be published next week on .) My interest for this article consists solely of one column in the paper's Exhibit 12, which shows how frequently each of the major companies has folded its funds over the past decade. That's far too much material for me to cover. Similarly, actively run funds have higher ratios than do passive funds. This tendency, regrettably, echoes the peripatetic habits of alternative-fund shareholders, who tend to chase recent performance. For example, funds that invest in alternatives have notably high lineup turnover ratios. The paper outlines the differences among organizations, countries, and investment categories. The sum of those numbers becomes, to use the authors' terms, the company's "fund lineup turnover ratio." Specifically, it provides the rates at which providers: start new funds and shutter old ones. Published this week, the white paper " As the Fund World Turns-Fund Lineup Turnover Globally," by Gabriel Denis, Bridget Hughes, Maciej Kowara, and Matias Möttölä, exhaustively measures the fund industry's product-development practices. Three decades later, Morningstar has at long last collected the data to support the anecdotes. They would switch to organizations that fulfilled their promises. Eventually, investors would realize which fund companies sold investments that did not last. There is sometimes an advantage to observing through a window.) The approach could only succeed for so long. (That said, most corporate executives failed to recognize the danger. Even at the time, the weakness of the whack-a-mole marketing strategy was obvious. The above analysis benefits little from hindsight. Speaking of which: Smith Barney is gone, too.Īs Don himself will tell you, he whacked a slow-pitch softball. Gone are Kemper, and Dean Witter, and Keystone, and PaineWebber, and Shearson Lehman Hutton … I mean Shearson Lehman Brothers … I mean Smith Barney Shearson. Meanwhile, not only have most of its competitors' offerings disappeared, but so have those rivals themselves. Every one of those funds continues to operate today. The conspicuous example was American Funds, which in 1990 managed a modest 21 funds. Firms that churned through their lineups, constantly launching and terminating funds, generated the headlines. In the early 1990s, my boss, Don Phillips, openly praised fund companies that dared to be dull. Morningstar was not the first researcher to appreciate the virtue of investment monotony, but it was the first to publicize that belief.
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