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Morningstar picks 'fund managers of the decade'

January 12, 2010 |  3:14 pm

Bond king Bill Gross at the Pimco funds today picked up another trophy for the mantel in Newport Beach: Morningstar Inc. named him its bond mutual fund “manager of the decade.”

Morningstar also named Bruce Berkowitz, who manages the Miami-based Fairholme Fund, as domestic stock fund manager of the decade. David Herro, who oversees the Oakmark International and Oakmark International Small Cap funds in Chicago, got the nod as the decade’s top manager of foreign-stock funds.

Karen Dolan, director of fund analysis at Morningstar in Chicago, said the firm made its choices based partly on the managers’ above-average returns last decade, while also factoring in the size of the asset pools they managed and how well they managed risk.

Grosspimco Gross’ Pimco Total Return bond fund, at $204 billion in assets the nation’s largest mutual fund, earned 7.7% a year in the last decade, on average, compared with a return of 5.5% a year for the average fund in its bond category.

Dolan said Gross has “stayed ahead of the competition throughout the decade by making the right calls at the right times,” including on interest-rate turns and on bond sectors.

And of course, Gross hasn’t been shy about throwing Pimco’s weight around: Most recently he has warned the Obama administration about the perils of continuing to run up trillion-dollar budget deficits. Gross said he has been selling U.S. Treasury securities in favor of German government bonds.

Morningstar’s choice for domestic stock fund manager of the decade, Berkowitz, steered the $10-billion Fairholme Fund to returns that averaged 13.2% a year for the 10 years, compared with a mere 0.01% for the average U.S. stock fund.

A “value”-oriented manager, Berkowitz “looks for good businesses with solid cash flows, has a contrarian bent and has timed his bets well,” Dolan said. Most recently he has favored healthcare and defense stocks.

Herro, the foreign-stock-fund winner, is a “deep-value investor at heart, who focuses on 50 to 60 stocks and readily loads up on individual sectors and markets when he thinks they're packed with compelling bargains,” Dolan said.

The Oakmark International fund, with $4.3 billion in assets, earned 8.2% a year in the decade, on average, compared with a 3.2% average for its category; Oakmark International Small Cap, with $830 million in assets, gained 10.1% a year versus a category average of  6.1%.

Go here to see Morningstar's list of finalists in each of the three categories.

-- Tom Petruno

Photo: Bill Gross. Credit: Pimco

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