Longleaf Partners is well respected in the investing industry.
From Swensen’s Unconventional Success:
Similarly in Mohnish Pabari’s The Dhandho Investor, Longleaf gets honorable mention.“Southeastern Asset Management (sponsor of the Longleaf Partners mutual-fund family) exemplifies every fundamentally important, investor-friendly characteristic conducive to active-management success. Portfolio managers exhibit the courage to hold concentrated portfolios, to commit substantial funds side by side with shareholders, to limit assets under management, to show sensitivity to tax consequence, to set fees at reasonable levels, and to shut down funds in the face of diminished investment opportunity.”
And for those interested, here’s a “Graham and Doddsville” interview with Mason Hawkins of Longleaf
http://www.longleafpartners.com/article ... er2010.pdf
So if ever there was a fund that would generate a positive and significant alpha, Longleaf would be near or at the top of the list. Given its prominence, I did some analysis of Longleaf’s US focused funds. Here’s the Fama-French three factor model comparison, and annualized returns over the last 10 years.
The results suggest the following (for the period 1992-2012):
- 1. Longleaf has not added any significant alpha beyond factor exposure. The Longleaf funds are value oriented (positive value load), their small-cap fund is closer to a midcap fund, and the fund betas are relatively low. The alpha’s on the Longleaf funds are not significantly different from zero, and are about the same as a broadly similar index fund. If there was any alpha it has been eroded by the 0.92% expense ratio on the Small cap fund, and the 0.91% expense ratio on the Partners fund.
2. The Longleaf Small Cap fund has the same size load as the S&P 400 (midcap) index, but a higher value load and lower beta. In this respect, the S&P400 index provides a closer apples-to-apples comparison.
3. For the 10 years to September 2013 the Longleaf fund had a 0.5% higher annualized return than the iShares S&P Midcap (400) fund (11.23 vs. 10.71), but on an after tax basis it had a 0.5% lower return (9.84 vs. 10.43).
Best,
Robert
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