Berkowitz closing the gates on his funds

Fresh off a chart-topping year, Bruce Berkowitz next month will close his mutual funds to new investors.
AUG 16, 2013
Fresh off a chart-topping year, Bruce Berkowitz next month will close his mutual funds to new investors. The $7.6 billion Fairholme Fund (FAIRX), the $241 million Fairholme Focused Income Fund (FOCIX) and the $267 million Fairholme Allocation Fund (FAAFX) will stop accepting new investors Feb. 28, Fairholme Funds Inc. announced Wednesday. Mr. Berkowitz could not be reached for comment. The timing of the closures is slightly unusual. Managers typically close a new fund to prevent excessive new deposits from forcing them to buy securities beyond those they view as good investments. The Fairholme funds, however, have been seeing net redemptions since 2011. The outflows started that year as the Fairholme Fund plummeted to a 32% loss, its worst single year of performance, even topping 2008's 29% loss. Investors pulled pulled $6 billion from the fund in 2011, according to Morningstar Inc. Mr. Berkowitz rebounded last year as the same stocks that sunk the fund in 2011, such as AIG, Sears and Bank of America, rallied, sending the fund to a 35% gain, best among large-cap mutual funds. The performance wasn't enough to stave off the outflows, though, as investors pulled $2.5 billion from the fund. The timing of the closures is unusual but not surprising, Morningstar Inc. fund analyst Kevin McDevitt wrote in a research note Wednesday. “Manager Bruce Berkowitz has alluded to this possibility a number of times over the past 18 months, feeling burned by the massive outflows of the past two years,” he wrote. “He says he would now rather have a smaller, core group of long-term shareholders who have a thorough understanding of his deep-value process and are less likely to bolt during periodic bouts of underperformance.”

Latest News

Advisor moves: LPL lands $350M veteran advisor duo in Florida
Advisor moves: LPL lands $350M veteran advisor duo in Florida

Also, Raymond James's employee advisor channel adds breakaways from Wells Fargo and Stifel, while UBS welcomes an ex-Morgan Stanley duo in Indiana.

SEC accuses crypto firm founder of running $425 million Ponzi scheme
SEC accuses crypto firm founder of running $425 million Ponzi scheme

It promised guaranteed principal and 10% monthly returns. The SEC says it invested nothing.

MassMutual Ascend tops $2 billion in RIA annuity sales as advisors warm to income products
MassMutual Ascend tops $2 billion in RIA annuity sales as advisors warm to income products

Ten years after entering the fee-based annuity market, MassMutual Ascend says nearly half its lifetime sales came in the past two years alone – but barriers remain among fee-only advisors.

Fintech bytes: Wealth tech firms target advisor productivity with new integrations
Fintech bytes: Wealth tech firms target advisor productivity with new integrations

Amplify, WealthReach, Zeplyn and Zocks have unveiled partnerships aimed at automating portfolio management, content creation, account opening, and client communication.

Trump Account contributions to get boost from new employer rules
Trump Account contributions to get boost from new employer rules

New Treasury and IRS proposals would let employers add tax-free payroll contributions to the retirement accounts as advisors weigh the fit for client families.

SPONSORED Direct indexing webinar targets tax-loss harvesting amid market swings

Northern Trust’s Ken Lassner shows advisors how to convert volatility into after-tax portfolio gains

SPONSORED Who builds the income when the pension disappears?

Dan Biagini of American Equity says the steady decline of pensions, longer lifespans and a reset in interest rates are rewriting how advisors build retirement income