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
By  JKEPHART
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

The 2025 InvestmentNews Awards Excellence Awardees revealed
The 2025 InvestmentNews Awards Excellence Awardees revealed

From outstanding individuals to innovative organizations, find out who made the final shortlist for top honors at the IN awards, now in its second year.

Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty
Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty

Cresset's Susie Cranston is expecting an economic recession, but says her $65 billion RIA sees "great opportunity" to keep investing in a down market.

Edward Jones joins the crowd to sell more alternative investments
Edward Jones joins the crowd to sell more alternative investments

“There’s a big pull to alternative investments right now because of volatility of the stock market,” Kevin Gannon, CEO of Robert A. Stanger & Co., said.

Record RIA M&A activity marks strong start to 2025
Record RIA M&A activity marks strong start to 2025

Sellers shift focus: It's not about succession anymore.

IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients
IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients

Platform being adopted by independent-minded advisors who see insurance as a core pillar of their business.

SPONSORED Compliance in real time: Technology's expanding role in RIA oversight

RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.

SPONSORED Advisory firms confront crossroads amid historic wealth transfer

As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.