Chasing alpha means following fund managers with the greatest success records. Most investors are familiar with names such as Benjamin Graham and Warren Buffet, but plenty of noted fund managers have delivered exceptional results. They’ve achieved success through managing mutual funds or other fund portfolios using a variety of strategies, and are known as some of the best fund managers of all time.
1. Peter Lynch
No list of the greatest fund managers would be complete without including the legendary Peter Lynch. He managed Fidelity’s flagship Magellan Fund from 1977 to 1990 and oversaw asset growth from $20 million to $14 billion. During his tenure, he beat the S&P 500 11 out of 13 years and ended his career with average annual returns of 29%.
Lynch was an advocate of careful stock picking, and erred toward a more conservative approach when it came to selecting his stocks. He eschewed difficult or hard-to-understand industries and coined the phrase “stick to what you know.” His research and books on investing are some of most widely read investment books on the market and considered necessary reading for many fund managers.
2. John Templeton
John Templeton was co-founder of Franklin Templeton, a brokerage firm that manages a wide selection of mutual funds and other investments. For his many accomplishments as a Rhodes scholar, CFA Charterholder and noted philanthropist, he was knighted by Queen Elizabeth II and is remembered as Sir John Templeton.
Templeton’s investment style was best described as contrarian – buying during depressions or economically difficult times and selling them after the recovery. He was a classic value investor and based his picks on fundamental research, and believed in holding for long-term growth.
3. T. Rowe Price Jr.
Another name on our list who founded an eponymous brokerage firm, T. Rowe Price Jr. managed a number of funds during his lifetime. Although he started his company in 1937, T. Rowe didn’t actually manage his own fund until 1950, where he logged gains of 500% in 10 years – the highest of any fund during that time period.
T. Rowe Price Jr.‘s biggest impact on Wall Street wasn’t his extraordinary track record, but his use of fee-based asset management rather than commission only. His investment style was value oriented, using a long-term buy and hold methodology while practicing careful diversification.
4. John Neff
John Neff ran Wellington Management’s Windsor Fund for 31 years with an average annual return of 13.7% before he retired in 1995. He was known for using his own spin on value investing to deliver exceptional returns over his long career.
Neff was a value investor in the sense that he focused on stocks with low P/E ratios, but he placed a special emphasis on dividend paying stocks. He used stocks dividend yield in his value calculations in a way that hadn’t been done before, creating his own unique “what you pay for” ratio. He also had a relatively high amount of turnover in his funds compared to the standard buy and hold philosophies of similar investors during that time.
5. Larry Puglia
Arguably the most modern mutual fund manager on our list, as of 2015, Larry Puglia manages T. Rowe Price’s Blue Chip Growth Fund. He consistently delivers solid alpha in the fund, beating the broader averages from a one-year, three-year and 10-year perspective.
Unlike most of the other names we’ve mentioned, Puglia isn’t classified as a value investor based on his style. His methodology is more closely in line with “growth at a reasonable rate” (GARP), which ironically was pioneered by Peter Lynch. By concentrating on what he calls “self-sustaining growth,” Puglia has managed to be one of the best mutual fund mangers in the past decade.
The Bottom Line
There are many other names who could be thought of as some of the greatest investors in history. One thing to note about all of them is the different styles each used to achieve success. There’s no single winning formula in investing, and these managers are evidence anyone can succeed if they formulate a strategy and sick to it.