Star managers on their own

23Oct05

Chuck Jaffe at Markewatch.com highlights the rough road star fund managers who go out on their own find themselves on. The story was prompted by the launch of a new mutual fund by David Winters, former manager at Franklin Resources’ Mutual Series of funds. Winters’ new fund uses a strategy more often used in hedge funds. While Winters’ track record speaks to a certain level of skill, Jaffe believes investors should take a good, hard look before investing:

From the time Winters started managing Mutual Discovery in February 2000 until he left in April, the fund earned a 9.5% annualized return while his average peer posted an annualized loss of 0.7%, according to Morningstar Inc.

That makes the Wintergreen fund mighty interesting.

Not only can you dance with a star but also you get in on the ground floor; studies have shown that new issues tend to have some pop, in part because the manager benefits from the flexibility of running a small asset pool.

Still, a good investment decision on a star’s new fund requires going beneath the surface.