Marta Norton
Marta Norton, senior fund analyst at Morningstar, Inc., Chicago, which provides research on more than 270,000 investment offerings in 18 countries.
The financial industry has been rolling out more mutual funds that resemble hedge funds but that, unlike hedge funds, require only small investments. Some of these mutual funds, which have an average age of just three years, shoot for skyrocketing returns by placing market bets on which stocks will drop as well as which will rise. They also use complicated strategies to try to avoid big drops when the market is headed south. But all that requires managers who are expert at forecasting directions for stocks and who have superb timing. Also, these funds tend to have high expenses, which should be avoided, fund analyst Marta Norton stresses. Norton says most funds in this category have short track records and questionable manager experience, so it’s hard to predict whether they will succeed. There are, however, a few attractive funds in this category, Norton says. She cautions that you should consider investing in them only if you already possess a diversified investment portfolio…
Calamos Market Neutral Income Fund (CVSIX). This fund uses an intricate technique to reduce volatility. Launched in 1990, it relies on many experienced analysts and is notable for having a relatively low expense ratio of 1.2%, compared with the category’s median expense ratio of 1.8%. Although the fund charges a load (upfront fee) of 4.75%, a no-load version (CVSRX) was launched this year. Performance: 3.4% annualized returns for the five years through June 30.
Diamond Hill Long-Short Fund (DIAMX). This five-star mutual fund enjoys an excellent record. Its management is adept at picking which stocks will rise and which will drop, and placing the right bets at the right time. It requires a minimum investment of $10,000. Performance: 13.2% annualized returns for the five years through June 30.
Hussman Strategic Growth (HSGFX). John Hussman, who holds a doctorate in economics, has successfully managed this low-cost, low-volatility fund since it was launched in summer 2000. Between then and early 2003, a period during which the bear market was raging, the fund generated annualized returns of 15.8%. For the first half of this year, it was up 1%, while most funds were down. Its expense ratio is 1.1% and it requires a minimum investment of just $1,000. Performance: 6.1% annualized returns for the five years through June 30.
