Thursday, March 12, 2009

First Pacific Advisors - "FPA Funds" Robert Rodriguez to Take 1 Year Sabbatical - FPA Capital (FPPTX) , FPA New Income (FPNIX)

This is some interesting news out of the mutual fund world; Robert Rodriquez is definitely one of the good guys out there and a very competent manager. He runs two well known funds FPA Capital (FPPTX) and FPA New Income (FPNIX). Two things specifically in this story stuck out to me
  1. the fact that despite being one of the very few mutual fund managers who carried very high levels of cash he still had a large percentage loss in 2008 (he carried this cash because he was anticipating a lot of turmoil in the markets and literally lost big clients due to it!) - this shows how tough things were out there; even if conceptually you did the right thing (high cash, anticipate turmoil) you still were blasted. There was simply no place to hide outside US Treasuries for most of the 2nd half of 2008.
  2. the whole "stress factor" situation
Oh yes, the last statement of the story is also priceless...

Via the Wall Street Journal
  • In a surprise move, First Pacific Advisors said that its well-known chief executive, Robert Rodriguez, will leave for a one-year sabbatical starting in January. Mr. Rodriguez will hand over the reins of the firm's FPA Capital value-stock fund to his current co-managers, Rikard Ekstrand and Dennis Bryan, beginning in 2010. Meanwhile, at the other fund helmed by Mr. Rodriguez, the FPA New Income bond fund, his co-manager, Tom Atteberry, will take over.
  • The plan is for Mr. Rodriguez to resume his role as an FPA managing partner in 2011, serving as an adviser but not a lead manager for the firm's investments. He has been with FPA, which recently ran about $8.5 billion in assets, for more than 25 years.
  • Industry headhunters say they expect more such announcements from investment firms in coming months, given that many money managers are demoralized by the treacherous market and accompanying investor redemptions.
  • Mr. Rodriguez, 60 years old, said in an interview that the move "has nothing to do with the market" but is partly motivated by his desire to leave money management with a strong performance record intact. "I can't say it hasn't crossed my mind," he said. Both FPA New Income and FPA Capital are up more than 5% annually for the past decade, beating stock and bond benchmarks by nine percentage points and 0.02 point, respectively.
  • Mr. Rodriguez has been frustrated with the world of professional investing in the past year. He correctly predicted the credit crunch and subsequent economic downturn but has struggled to deliver strong stock returns.
  • FPA Capital slid 35% last year, beating the Standard & Poor's 500-stock index by two points. It is doing better this year, ahead of the market by eight points, though still down 17%. Investors' withdrawals and market declines have pushed assets down to $753 million from $2.2 billion in 2007.
  • The $2.8 billion FPA New Income fund has done better. It has gained assets since 2007 and returned 4.8% last year. It is up 0.73% this year, beating more than 90% of peers.
  • One of Mr. Rodriguez's biggest gripes has been institutional clients' leeriness about the high cash level his stock fund maintains. Mr. Rodriguez keeps more than a third of the fund in cash to protect investors from the declining market.
Now for the clincher, and yet another reason to like Mr. Rodriguez
  • Mr. Rodriguez says he plans to use the leave to contemplate how the economic landscape will look in coming decades. He is thinking about traveling the world with his wife, including visiting South America. When asked if he would work with the U.S. government to fix financial markets, he responded: "No, the government is fundamentally broken."
The truth hurts.

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