CHARLES A. JAFFE
TIMES-DISPATCH GUEST COLUMNIST
Published: December 31, 2008
With the average stock fund down about 40 percent in 2008, you couldn't blame investors for hoping that the bulk of mutual funds would simply quit the business and return what's left to shareholders.
Alas, just a few hundred funds actually perished in 2008, according to Morningstar Inc., far fewer than died in any other year this decade.
While no one truly mourns a passing fund, investors should not ignore for whom the bell tolls, because some left behind a legacy to learn from. With that in mind -- and in the spirit of year-end retrospectives showing famous people who met their demise during the year -- here are the most noteworthy mutual fund passings of 2008:
American Heritage and American Heritage Growth: In 1994, manager Heiko Thieme ran a magazine ad that screamed "Don't invest in my fund!" American Heritage had been the industry's very top performer in 1993, which drew a scad of investor assets and publicity just in time for it to hit the skids in 1994. Thieme's ad said his fund would be a bad fit for anyone who didn't want "to take performance risks in the pursuit of superior long-term performance." Thieme may have pursued that performance, but he seldom caught it. His highly concentrated portfolio of illiquid securities would fluctuate wildly, sometimes suffering double-digit percentage losses in a single day and only occasionally getting that kind of pop in the right direction. At one point, 97 percent of American Heritage's portfolio was invested in a company making an injectable treatment for erectile dysfunction (just say that aloud and it will quickly come to you how repulsive that idea is).
For the record, of all mutual funds operating in 2008, it will be the very worst, losing 99.95 percent of its value in 2008.
SSgA Yield Plus and Evergreen Ultra Short Opportunity: One of the cruelest realities of the current economic crisis has been that even the "safe" investments haven't always stayed that way. The average ultra-short bond fund is down about 6 percent in 2008, according to Lipper Inc., but these two both lost more than three times that much by the time management pulled the plug in June.
The Blue funds: The tiny Blue funds -- they came in largeand small-cap growth flavors -- allowed "progressives" (translation: Democrats) to invest in companies that "act blue" and "give blue." While they might have thrived under the new administration, they didn't survive to see it. These funds were donkeys from the get-go, a gimmicky proposition with poor follow-through.
The Van Wagoner funds: Garrett Van Wagoner was one of the most hyper-aggressive managers of the 1990s, building his reputation at Govett Smaller Companies before breaking away from that chart-topper in 1996. Van Wagoner kept the hot streak going in his new shop and money flooded in; a $10,000 investment in Van Wagoner Emerging Growth at the start of 1998 was worth more than $40,000 by early 2000. Assets peaked at more than $3 billion.
And then the bear market turned the whole thing to mud; by early 2008, that $10,000-turned-$40,000 had shriveled to just $4,000, meaning the fund was off 90 percent from the market's peak.
Charles A. Jaffe is senior columnist at MarketWatch. He can be reached at
or at Box 70, Cohasset, MA 02025-0070.
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