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March 02, 2006
The PRIMECAP diet
Dan Wiener, editor of the Independent Adviser for Vanguard Investors, just published an interesting round-up of the buying habits of Vanguard's fund managers. According to Wiener, few Vanguard managers actually eat their own cooking--in other words, they fail to invest big sums in the funds they manage.
"What?? astounding is the sheer number of managers that have absolutely no stake in their funds," Wiener writes. "Nothing, nada, nyet. Paid millions, they haven?? put a single, solitary buck into their charges."
The true standout is PRIMECAP Management, where virtually all of the firm's top managers have more than $1 million invested in Vanguard PRIMECAP, Vanguard Capital Opportunity, and newcomer Vanguard PRIMECAP Core. Thanks to Dan's savvy advice, I've been a shareholder in Vanguard PRIMECAP for more than a decade now.
Vanguard PRIMECAP, incidentally, is A-rated by BusinessWeek's Mutual Fund Scoreboard in the large-cap growth category. Unfortunately, it's also closed to new investors.
There are some good alternatives: Vanguard PRIMECAP Core, a new Vanguard fund which seems to move in tandem with Vanguard PRIMECAP, is a decent option. And PRIMECAP, which is based in Los Angeles, also offers three funds under its own brand, known as PRIMECAP Odyssey.
A caveat: PRIMECAP's home-grown portfolios, which were launched in November 2004, have higher expense ratios of 1.25% since they haven't achieved a huge asset base yet. Yet the performance out of the gate has been pretty good, so these chowhounds are definitely worth a look.
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Well, you can see that as a diversification. Their careers (and, therefore, incomes) depend quite a lot on how well their funds perform, so they quite naturally don't want to put any more eggs in this basket.
Posted by: sredni vashtar at March 3, 2006 04:27 AM
Just bought into Primecap Core this past week.
Hope it's a wiener, I mean winner!
Posted by: Big Steve at June 10, 2006 02:32 PM