Betting the farm on a dozen stocks

Co-managers of ultra-concentrated fund put entire net worth on the line
AUG 09, 2012
We've got another solid entry for the “Eating Your Own Cooking Club” of portfolio managers that invest heavily in strategies they manage. Richard Cook and Dowe Bynum, co-managers of the Cook & Bynum Fund Ticker:(COBYX), have virtually all of their respective net worth invested in the fund. This is no small show of confidence in a strategy considering that the portfolio rarely holds more than a dozen stocks, and currently includes just eight, along with a 30% allocation to cash. “We try to design a strategy that is the best over a 30-year period of time, while a lot of strategies are only designed for this year or next,” Mr. Cook said. “We define risk by what the chances are of a permanent loss of capital, so this is more business risk than market risk, and that's why we're comfortable with that level of exposure.” The three-year-old fund, which has a five-star rating from Morningstar Inc., is modeled after a separate account strategy that was launched by Cook & Bynum Capital Management LLC in 2001. This latest example comes on the heels of last week's report that Sammy Simnegar, manager of the $690 million Fidelity International Capital Appreciation Fund Ticker:(FIVFX), has “100% of my 401(k) money in this fund,” as well as “six figures worth of my personal money” invested in that fund. Maybe the gauntlet is being thrown down on the idea of managers investing in their own funds, or maybe it should be because as we reported last week almost 45% of all portfolio managers don't invest in funds they manage. “I think all investors should demand it from all money managers,” said Mr. Cook. “If you're buying and selling individual stocks and then separately managing a fund, that's a distraction and a huge conflict of interest. But ultimately, it's the investors that will have to demand managers start eating their own cooking.” In addition to investors, financial advisers can and should also play a part of putting more pressure on money managers to invest in their own funds.

Latest News

UBS cuts staff jobs outside the United States: Report
UBS cuts staff jobs outside the United States: Report

Financial advice firms continue to shed employees, often a way to reduce costs.

Foreign investor sues Florida EB-5 sponsor, alleges he was left empty-handed after $72M sale
Foreign investor sues Florida EB-5 sponsor, alleges he was left empty-handed after $72M sale

The building sold for $72 million - he says his $550,000 never came back.

Fintech bytes: FP Alpha asserts tax software leadership with updated AI snapshot tool
Fintech bytes: FP Alpha asserts tax software leadership with updated AI snapshot tool

Also, Zocks and Amplify unveil integrations with Conquest and Wealthbox CRM to extend their reach among independent advisors.

Pathstone absorbs $12B Philadelphia RIA Mill Creek Capital
Pathstone absorbs $12B Philadelphia RIA Mill Creek Capital

The deal creates one of the largest independent RIA footprints in the Philadelphia metro region, with more than $30 billion in combined client assets.

Advisor moves: Cetera scoops $490M Commonwealth team in Pennsylvania
Advisor moves: Cetera scoops $490M Commonwealth team in Pennsylvania

Elsewhere, Osaic and Ameriprise each recruited family-owned practices previously affiliated with LPL and Thrivent.

SPONSORED Estate planning isn't a service add-on. It's your retention strategy.

As $84 trillion prepares to change hands, advisors who treat estate planning as peripheral are quietly building a sieve, not a book.

SPONSORED Why strategy matters more than performance

In volatile markets, the advisors who win aren't the ones with the best calls - they're the ones whose clients stay the course.