Can Two New Managers Follow Legends?
It's tough filling a legend's shoes, but someone has to do it... and these two have taken over for a couple of the top fund managers around.
Some of the trickiest handoffs in the fund world happen at the retirement of renowned managers who run idiosyncratic strategies that are a manifestation of their personalities.
Not only are the successors filling big shoes, but they also have to decide how much they want to change the strategy in light of investors’ expectations. After all, investors didn’t come to Third Avenue Value (TAVFX) or Columbia Value & Restructuring (UMBIX) for plain vanilla. They left the beaten path for managers and strategies that offered a better way.
As fund investors, we must be particularly alert to changes at such funds, while at the same time assessing the abilities of the managers and analysts in charge. Quirky strategies make for quirky returns, and it takes a longer time period to really judge them. Look back over their histories, and you’ll see these funds have gone in and out of favor a few times, even though the long-term returns look appealing.
In June, I moderated a panel of managers running two funds that had recently made the switch. I felt our Analyst Ratings for the funds were validated by what I heard, but with the funds in transition those ratings are hardly carved in stone.
Third Avenue Value
After the panel, the first question I was asked was why we are rating Third Avenue Value Silver in light of weak recent performance. For starters, Third Avenue has built a strong stable of analysts and managers, each of whom apply Marty Whitman’s “safe and cheap” mantra a little differently.
Ian Lapey has worked at Third Avenue for more than a decade, and was named comanager in July 2009. Whitman handed him the wheel in March 2012 when he stepped down from the fund (though not from the firm).
Although he says he plans to continue using Whitman’s strategy, Lapey quickly went to work on what was the fund’s biggest vulnerability. He pared the fund’s huge weighting in Hong Kong real estate names to 39% of assets from 50%.
This makes sense, as defensiveness was one of the fund’s appealing traits. Even if Whitman and Lapey are right about the Hong Kong real estate plays, the bet is outsized and not really consistent with “safe and cheap” from a portfolio perspective.
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