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01.09.03 Dear Shareholder:
It would be too easy for us to say, "oops! I did it again." But it isn't entirely our fault. Oh no. What we have done has been nothing but good, even if it isn't reflected in the statement you don't open each quarter.
What you don't see is how we have changed. Our mutual fund company has become more nimble with smaller research teams that can react better with a deeper quality decisions than we have made in the past. Not only that, but our analysts are better, not different, just better. In this age of information, where you as an investor have better access to materials, it helps that we also have improved access to pertinent information. After all, we are investing your money.
Another thing you should know is the review of your portfolio is done on a more regular basis and done with much more intensity. I know that you were under the belief that this was common practice here at XYZ Funds but in the past, we were so confident in our decisions that we still believed in our investments long after they started to head south. Like I mentioned, that has changed. To borrow the phrase of the 41st President, "Message: I care."
And you should note that because of these changes, we have gotten better at what we do. For instance, we determined that through the best rearrangement of the numbers possible and with our partners, Lipper, Inc. we have found that what you thought was bad in fact wasn't so bad. Lipper is a leading mutual fund rating company and with their help we stumbled across some interesting information about us. 75% of our funds earned first and second quartile rankings among the competition who seek to do good things with your money much in the same manner we have. If you go back far enough and we went back 10 years, our best fund is ranked number one among funds that invest in similar styles.
Now these aren't absolute numbers and your retirement fund is probably not going to let you retire early like you were planning, but hey, we are number one. Just remember that equities are still the best investment and that information is stacked dating all the way back to the twenties.
Now you probably wonder whether we should be doing something different to make you the money we so diligently lost and we are. In some cases we have taken a mathematical approach. We can actually hire the whole fund out and let a machine to the picking, and with any luck, it is the machine that will take the blame should there be another downturn in the market. We also let our managers do the job they have become experts doing, which they are good at because we still pay them well.
What we want you to know is that no matter what we do; no matter how much John Bogle, the old guy who claims the creation of the mutual fund as his own and the market venerated voice behind Vanguard complains about disclosure of our voting practices with your shares; no matter how many educated bystanders try and take a poke at how to rank funds and managers; the blame will still rest squarely on you.
Let's face it, the demographics of the investor class is simple. Young folks consumer, middle age folks invest, and old folks sell. Given the overwhelming amount of middle agers out there, this is a group that has lost it's direction. Not us. The fundamentals of the companies that we choose are still rock solid. Our methods are realistic and sometimes above reproach. But you folks react to news and sell stock whether the company is in jeopardy or not.
Just for a moment, put yourself in our shoes. We come to work, we read reams of information. We talk to folks in the industry and based on this infallible research and our keen sense of opportunity, we invest gobs of money. But something in the market out there doesn't see it the same way and you folks sell on rumor, news, and emotion. How in the heck are we supposed to compete with your erraticism?
You have to remember that there are 6,843 mutual funds out there. That's more than twice the publicly traded companies with valuations of $100 million or more. The competition for quality equities is stiff. Throw in a lethal dose of volatility, an administration's infatuation with attempted economic leadership, and boomers who wanted to retire at 50 and now will have to work a couple of ten years longer and you have a stew worthy of the best antacids.
But we have been around a long time, outlasting our peer group, in which 45% of the funds hoping to snag your investment dollar have been around less than five years. These funds certainly can't trot out their track record, now can they.
The bottom line is that you would be wise to keep hanging in there. Without sounding too optimistic, the landscape is littered with opportunities. Like a forest fire culls dead wood, we have learned to become more steady and strong like the trees left standing. You might say , "to hell with it all" and walk away but you would be missing another chance for regrowth of your devastated portfolio.
Best regards,
Your Mutual Fund Manager.
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