Robert Rodriguez — Mutual Fund Switch Hitter
Kurt Brouwer September 6th, 2007
Bob Rodriguez is one of our favorite portfolio managers. He’s one of the very few portfolio managers able to manage both a stock fund and a bond fund, with excellent results.
In addition to running FPA Capital, an excellent small cap value stock fund, Bob has also managed a risk-averse bond fund, FPA New Income for many years. In his career, he has twice been named Morningstar Manager of the Year, once in 1994 and again in 2001.
This profile by Marla Brill at Brill Interactive has an interesting take on the Fund:
‘…But shareholders of FPA New Income Fund have witnessed a more benign version of the interest rate beast. Since its inception in 1969, the fund has not had a single calendar year of negative returns. Robert Rodriguez, its manager since 1984, attributes the steady course of the fund during his tenure to a healthy fear of what the bond market can do…’
My colleague, Steve Janachowski, has an interesting perspective on Bob Rodriguez. He considers Rodriguez to be a contrarian and opportunistic investor in that he revels in zigging when the market and most professional portfolio managers are zagging. Rather than chase trends, Rodriguez is skeptical of long-running consensus trends. He is the ultimate contrarian.
FPA New Income is a very eclectic income fund that defies easy categorization. Bob Rodriguez and Tom Atteberry run the Fund with an absolute return mandate because they do not want to lose capital. For example, over the past few years of rising interest rates, Rodriguez has kept the Fund’s average maturity very short, with a duration of about one year. While other managers stretched for yield in risky areas of the market such as subprime, Rodriguez waited for opportunities and the market to come to him.
Despite the Fund’s conservative nature, Rodriguez and Atteberry are also opportunistic. For example, a few years ago, spreads on high yield or junk bonds were at historically high levels so they put in a hefty allocation to carefully-selected high yield bonds. Over time, the yield spread narrowed considerably, junk bonds did well and other portfolio managers and investors began to fall in love with high yield. At that point, FPA New Income began selling the bonds and it had largely eliminated its high yield holdings by the time spreads returned to historically low levels.
With his stock fund, FPA Capital, Rodriguez seems to be able to put all of his talents together, for he holds stocks, bonds and cash in the Fund. In fact, he has put together a fine record, both in terms of getting returns, but also in terms of managing risk.
For example, Rodriguez stuck to his guns during the heady technology and growth stock romp in the late 1990s and his portfolio was well-positioned in solid and cheap stocks. While other managers saw their portfolios dwindle in size during the 2000 - 2002 bear market, FPA Capital prospered with an outsized positive return.
For 2007 the Fund was up 8.75% (through July 31, 2007) even though it had a very high percentage of assets in cash all year, with over 36% in cash at the end of July. For the same period, the Lipper Mid-Cap Value Fund Index was up 5.02% and the S&P 500 was up 3.64%. For the past five years, the Fund had an average annual return of 17.29% compared to 16.95% for the Lipper Index and 11.81% for the S&P 500.
FPA Capital’s returns are particularly noteworthy because the Fund has held sizeable positions in cash for much of this time. In short, Rodriguez is a very good stock picker. In fact, I would love to be able to invest in a fund he runs that is always fully-invested.
One beef we do have is that the Funds are load funds. Insitutional investors (such as Brouwer & Janachowski) can buy the Funds through custodians on a net asset value basis, eliminating the load. However, most investors have to pay the load to get access to Rodriguez.
- Investing , Mutual Funds
- Comments(0)
Did you enjoy this article?
