Every year, Morningstar makes a big deal about announcing its pick for Morningstar Manager Of The Year, which honors whomever Morningstar feels best navigated the markets.  The winners are invariably well-respected stock pickers with solid track records.  It is no doubt an honor to win the award.

The 2009 nominees for domestic-stock manager and fixed-income manager of the year were announced on Morningstar.com last week (sign up for a free Morningstar account):

Fixed-Income Manager Of The Year Nominees

Phil Condon and Rebecca Flinn, DWS Strategic High Yield Tax Free (SHYTX)
Farnham, Kane, Landmann, Nucci, Metropolitan West High Yield Bond (MWHYX)
Dan Fuss, Kathleen Gaffney, Matthew Eagan, Elaine Stokes, Loomis Sayles Bond (LSBRX)
Jeffrey Gundlach and Philip Barach, TCW Total Return Bond (TGLMX)
Mark Notkin, Fidelity Capital & Income (FAGIX)

Domestic-Stock Manager Of The Year Nominees

Bruce Berkowitz, Fairholme (FAIRX)
Staley Cates and Mason Hawkins, Longleaf Partners (LLPFX)
Jeff Cardon, Wasatch Small Cap Growth (WAAEX)
Dennis Delafield and Vincent Sellecchia, Delafield Fund (DEFIX)
Bill Nygren, Oakmark Select (OAKLX) and Oakmark (OAKMX)

Why You Shouldn’t Care

Shouldn’t you be paying attention to who the best fund managers are?  After all, don’t you want to be in the best-performing funds?  Of course you do.  Thing is, you want to buy the best-performing fund before it tops the charts, not afterwards.  You’ve heard it a thousand times, but it bears repeating:  past performance is no guarantee of future results.

Case in point:  consider the recent performance of the 2008 manager of the year winners…

Charlie Dreifus of Royce Special Equity (RYSEX) has been outperformed by 44% of his peers this year.

Bob Rodriguez and Thomas H. Atteberry of FPA New Income (FPNIX) have been outperformed by 98% of their peers this year.

David Samra and Dan O’Keefe of Artisan International Value (ARTKX) have been outperformed by 90% of their peers this year.

Obviously, not even the best managers can be expected to outperform year after year.  Longer-term numbers are what matters.  Still, top performers in any given year have a striking tendency to bring up the rear in subsequent years.  This year’s results certainly aren’t unique.  This year’s winners might not fair any better.  Or the might.  The point is, you can’t assume this year’s winners will do as well next year.  If history is any guide, they won’t.

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