WEALTH HEALTH: A second helping of holiday jeers for the worst of 2013
Nothing is better at the holidays than second helpings of the foods you love. Consider this a second helping of food for thought.
It’s Part 2 of my Lump of Coal Awards, now in their 18th year, a dishonor presented to managers, executives, firms, watchdogs and other fund-industry fumblers for action, attitude, behavior, execution or results that are misguided, bumbling, offensive, disingenuous, reprehensible or just plain stupid.
The market’s 2013 gains have made it easy to overlook ineptitude this year, but I singled out nine “winners” last week whose ham-handed incompetence should earn them nothing more than a Lump of Coal in their Christmas stockings. Now it’s time for the worst of the rest.
And the losers are:
PIMCO and Invesco for being off-target with their target-date funds.
Lipper Inc. tracks six different dated categories for “mixed-asset target funds” for the years 2025-2050, and PIMCO’s RealRetirement funds are at the bottom of every category group that ends with a five (2025, 2035, 2045), while Invesco’s Balanced-Risk Retirement funds lag every year ending in zero (2030, 2040, 2050). The only reason PIMCO wasn’t dead last in all groups was that Invesco was there; the reason why Invesco was not at the bottom in all groups is that it doesn’t have funds for years ending in five.
Worse, both fund groups lagged average performance in each of those categories by about 10 percentage points, difficult in a year that forgave almost all investment strategies.
The Vanguard Group, for adding injury to insult in its money-market funds.
Investors using money-market funds as safe-haven holding pens for their cash know they’re not getting much in return these days, but what shareholders in Vanguard’s three money funds got in September was completely unexpected, a capital gain.
What happened to generate the gain here is unimportant; this gain is not extra profits, just extra tax headaches. And while it’s easy to dismiss the gains as fractional, that’s also how you can describe returns. In fact, the monthly income per dollar in Vanguard Prime at the time of the distribution was $.00001, meaning the gain paid in September was equal to the income the fund generated for the entire year up to that point. Thus, all gains for the first nine months of 2013 became taxable, leaving shareholders with a tiny capital-gains reporting issue to deal with when they file their 2013 tax returns. Yuck.
LocalShares, for rooting a little too hard for its hometown.
Plenty of people head to Nashville seeking fortune and fame, but they do it in country music, not in mutual funds. But the people behind the LocalShares Nashville ETF (NASH) are singing the mutual-fund tune; they opened this year investing only in companies based in and around Music City.