Notch One More Up for Passive Investing.

Not that you needed anymore proof that it’s impossible to beat the indexes on a consistent basis. Still, it’s worth noting when another of the mighty have fallen.

Ken Heebner’s CGM Focus, the top U.S. equity fund in 2007 with an 80% return on big bets in commodity stocks, is “at the bottom of the heap for the second consecutive year” says Bloomberg, after investments in insurers such as Hartford Financial Group and Wal-Mart Stores went awry. Remember those heady days, when CGM advertised on CNBC? Heebner was such a big deal in his own right that the ad’s specifically mentioned the fund was managed by him.

If you can’t remember seeing any of those ads recently that’s because the CGM Focus fund trailed 96% of similar managed funds in 2008 and 99% this year through July 9, according to Morningstar.

In a moment of supreme understatement Morningstar analyst Nadia Papagiannis tells Bloomberg, “His market-timing skills have not been working for him in the past year.” Since 2007, the fund is down 55%, with a 13% drop this year through July 9, compared to the SPDR (SPY), which is up 3.2% so far this year. Surprisingly, neither Heeber nor his spokeswoman was around for comment. The most stunning statistic is the CGM fund turnover ratio, which describes the rate at which the portfolio changes during the year. At 504%, the fund sells its entire portfolio five times a year, which is four times more than peers.


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