You've probably heard of most of today's best mutual fund managers: Will Danoff, the manager of Fidelity Contrafund, Dan Fuss of Loomis Sayles Bond, David Herro, the manager of Oakmark International. The problem is, so has everyone else. Who are today's up-and-coming star managers, and how did they get there?
Here are five managers you should keep your eye on. We've selected them based on their age, performance and recommendations from other fund watchers, such as Morningstar Inc.'s Russel Kinnel and Jim Lowell, editor of Fidelity Investor. The specific criteria were relatively simple: A three-year record that beats their category average, tenure of less than five years at the helm of their funds, and younger than 50. (Contrary to popular myth, few funds are run by 20-somethings: 35 is considered a whippersnapper in the mutual fund world, and 40 is still young to have charge of a fund.)
We've also gone out of our way to identify bond managers as well as stock managers, since most clients need good managers on the bond side as well as the stock side. Our five managers include one multi-cap domestic stock manager, one small-cap manager, an international fund manager, a high-yield bond manager and an emerging markets manager.
What do they have in common? Hard work is one touchstone, as is a thirst for learning, and an appreciation of history.
"Because I was young, all I could do is outwork and outstudy everyone else," said Samy Muaddi, portfolio manager for the T. Rowe Price Emerging Markets Corporate Bond Fund. "You need to study history in granular detail to see what creates value in the business world," said Arvind Navaratnam, manager of the Fidelity Event-Driven Opportunities Fund.
The other touchstone: a passion for their field.
"Find something you love," said Bryan Krug, manager of Artisan High Income. "If you love it, you'll succeed."
Here, then, are our five managers who are not only doing what they love, but excelling at it.
Education: Bachelor's in finance from Miami University's Farmer School of Business.
How did you get your current job? "I was fortunate to get a lot of hands-on experience early," Mr. Krug said. "I did credit work on distressed portfolios at Pacholder Associates Inc., now part of J.P. Morgan Asset Management. Then I went to Waddell & Reed to help identify problems when bonds went bad and shape some of their views in terms of avoiding mistakes. I had sector coverage at 22 — it was amazing, and it's quite rare to get that opportunity these days. I was given portfolio management responsibilities in 2006 and a small fund to run. The fund was $10 billion when I left. I moved to Artisan because I wanted overall control of the team and to be able to manage capacity — high-yield is a capacity-constrained area. I was attracted to Artisan's autonomous team approach. I bet on Artisan, and Artisan bet on me. I built the team, launched the fund in March 2014 and have had a decent amount of success in a choppy market."
How do you run the fund? "It's an idiosyncratic portfolio, and some might look at it as an equity surrogate," Mr. Krug said. "Right now, I'm finding more company-specific opportunities as opposed to broad-based themes. The economy is in good shape, corporate profitability is great and if there's any area of distress, it's already well-discounted in the market."
What advice would you give to future fund managers? "Find something you love. Have the passion to do the work. It's a business that, if you do the work, you provide value, and if you provide value, you should expect to be rewarded."
Last book read: "'Red Notice,' by Bill Browder, the story of a fund manager who invested in Russia after the fall of the Berlin Wall and nearly lost his life doing it."
What do you do when you're not managing the fund? "I've got three young children, and that takes up most of my time," Mr. Krug said. "I don't have a lot of excess time."
Education: B.A. in economics from the University of Maryland, College Park.
How did you get your current job? "I'm lucky they took a chance on me," Mr. Muaddi said. "I didn't have a lot of experience, but I had good grades. I was the [student]commencement speaker at the University of Maryland. My first interest was in economic development — I'm a Palestinian-American. I took a role on the emerging-markets team as an associate analyst. It was a fairly junior role, but I had two good mentors: Ted Robson and Mike Cornelius. I was made associate portfolio manager five years ago, and now I'm running the Emerging Markets Corporate Bond Fund."
How do you run the fund? "I'm the face of the team, but I couldn't be in the manager's chair without the team," Mr. Muaddi said. "Emerging-markets credit is extremely difficult: We cover 75 countries and have 200 research trips a year. There are four things that can go wrong with emerging-market bonds: Fiscal issues, current account balances, politics and contingent liabilities. As I go through those four factors, I feel better today than I did after the financial crisis."
What advice would you give to future fund managers? "You have to align your personal passions with your career. I was passionate about developmental economics because my family was displaced in the 1960s and 1970s. Also, you have to identify what your weaknesses are and aggressively address them."
Last book read: "Diamonds, Gold and War: The British, the Boers, and the Making of South Africa," by Martin Meredith.
What do you do when you're not managing the fund? "I have a young daughter, and that takes up a lot of my time. I do read a lot — it's an obsession. I've read hundreds of books on emerging markets. The biggest weakness of a young investor is youth, so it's really important to read about history."
Education: B.A. in economics and philosophy and a B.S. in industrial engineering and operations research from Columbia University and an MBA from Harvard Business School.
"I'm a believer in being a polymath," Mr. Navaratnam said. "It helps to bring different lenses to a problem. Investing is a liberal art. It's not just math. It's the intersection of qualitative and quantitative thinking."
Fund overview: The fund takes advantage of temporary price dislocations caused by events unrelated to the company's fundamentals, such as a price drop when a stock is removed from an index. Morningstar currently classifies it as a small-company stock fund, but it can invest in companies of any size.
How did you get your current job? "After I graduated, I went and worked in private equity for four or five years, focused on special situations. I was fortunate enough to join Fidelity after that time, and within six months, I pitched them on the idea for the fund. I wanted my money managed this way and was very fortunate that they gave me money for a pilot fund to test it. They were happy with the results over a few years, and it was the first time in a few decades that someone had launched a new type of fund — I believe Joel Tillinghast's Low-Priced Stock Fund (FLPSX) was the last one." (Low-Priced Stock was launched in December 1989; Fidelity Event-Driven Opportunities launched in December 2013.)
How do you run the fund? "I offer a double value proposition," Mr. Navaratnam said. "These corporate actions lend themselves to mispricing and forced selling, which results in the fund having a lower correlation to other funds. I sell when I believe something has hit its intrinsic value, the company makes a capital allocation decision I strongly disagree with or I get information that changes my thesis for owning it. I tend to hold for many years. I'm very patient."
What advice would you give to future fund managers? "Don't think of yourself as a fund manager but as an owner of businesses. Take a long-term view on what creates value, and find a management team aligned with that outlook.
"Warren Buffett sat next to me at a luncheon at business school," Mr. Navaratnam said. "I had studied him for years and knew what I wanted to ask. And one thing we discussed was how to spend your time. He talked about the importance of spending time on what you love to do, and that you have to try to do a lot of research and be thoughtful. I structure my day around that."
Last book read: "Good to Great to Gone," by Alan Wurtzel, former CEO of Circuit City.
"I was surprised by how unbiased and clinical he was, from the company's founding through the go-go days, to the day it goes bankrupt."
What do you do when you're not managing stocks? "My wife and I just had our first child," Mr. Navaratnam said. "I spend my free time changing diapers."
Education: Bachelor of Accountancy, University of Glasgow
How did you get your current job? "I was hired by Barclays Global Investors and at that time, we were building first-generation quality models for stocks," Mr. Mathieson said. "We were systematically modeling the qualities of businesses, measuring return on invested capital and how management was generating returns for shareholders. It was also a contrarian way of looking at quality: looking at those numbers that are too good to be true. In 2009, BlackRock bought Barclays Global Investors, which is how I got to BlackRock."
How do you run the fund? "My job is very much like a pilot in today's airplane," Mr. Mathieson said. "You wouldn't get into the plane if it didn't have a computer, and you wouldn't get in if it didn't have a pilot, either. On a day-to-day basis, I'm overseeing the inputs and outputs of the process — we run 2.5 terabytes a day, and I see how much things have changed and make sure the portfolio is aligned with all the information we have."
What advice would you give to future fund managers? "I think the investment landscape is changing tremendously," Mr. Mathieson said. "The amount of information available is exponentially higher than it was 10 years ago. I'd encourage them not to take too narrow a focus — and not to underestimate the value of coding."
Last book read: "Red Notice," by Bill Browder. "I like learning how other investment approaches can and do work, and this guy was successful in a unique environment — Russia just after the collapse of communism."
What do you do when you're not managing the fund? "I moved to San Francisco with the team about 18 months ago," Mr. Mathieson said. "I lived in London for 20 years previously, and it's very different from where I grew up. I live in Marin County, where mountain biking began, so not going mountain biking here is like living in the Alps and not skiing.
Education: B.A. from Manhattanville College, MBA from Columbia Business School.
How did you get your current job? "I had been a small-company stock manager at Brown Capital in Baltimore when Alger approached me," Ms. Zhang said. "It was a great opportunity to build a small-company stock fund from scratch. It's very exciting for me to plant new seeds and see them blossom." [The fund launched in March 2008.]
How do you manage the fund? "We define 'small' in terms of revenue, not market capitalization, and we look for revenue to double in three to five years. We let our winners run, so we don't sell when a stock reaches a certain market capitalization. We hold fewer than 50 stocks, and look for sustainable topline growth. And we focus a lot on the downside risks: We want high growth and high quality."
What advice would you give to future fund managers? "Be an avid reader," Ms. Zhang said. "The world is changing, especially for small-cap companies, so you have to be curious. Intellectual curiosity is one of the most important qualities for a fund manager. And you have to have an open mind and be humble, because this can be a very humbling business. You have to be willing to stop and think, 'What if we're wrong?'
Last book read: "The Cable Cowboy: John Malone and the Rise of the Modern Cable Business," by Mark Robichaux. "I appreciate a lot of [Malone's] thought processes, and I love learning from exceptional business leaders. My favorite books are biographies or autobiographies of successful people."
What do you do when you're not managing the fund? "I started taking piano lessons about 10 years ago," Ms. Zhang said. "I love to travel. And I have a young child, so we just came back from a Disney Star Wars cruise. And I mentor a lot of young business students."