Monday, June 2, 2008

130/30 mutual funds sucking wind

I still haven't pulled the trigger on a 130/30 fund yet, and maybe that's a good thing (free WSJ Digg link). Most 130/30 funds are trailing their benchmarks, and the article blames managers who aren't good at going both long and short.

Some are run by managers with relatively little short-selling experience. Take Fidelity 130/30 Large Cap Fund, introduced in April and ahead of the broader market since then. Skipper Keith Quinton is a stock-picking pro; his Fidelity Tax-Managed Stock fund is in the top 10% of Morningstar Inc.'s U.S. "large blend" category for the past three years. But his shorting experience? Thirteen years ago, he ran a trust fund that made bearish bets. Fidelity says its trading desk has long experience with short sales.

Other funds are run by skippers who may have experience shorting stocks but lackluster stock-picking records. The managers of RiverSource 130/30 U.S. Equity Fund, which so far this year trails the broader market, have been in the bottom half in recent years at stock funds they've run. RiverSource declined to comment on its managers' performance.

My search for good hedge fund-like investments for the mass affluent continues.