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Face it; investors like to see certain names in mutual-fund portfolios.

It inspires confidence to see a fund holding companies recognized as leaders, steadfast performers and “good risks.”

That, in turn, has inspired decades of “window-dressing,” the oft-disavowed, but widely practiced tactic of making sure that “the right names” are in a portfolio on the days when the fund must report holdings, so that shareholders are comforted with the picture they see when they get that rare glimpse of what’s happening.

But if you want proof that investors should not be too concerned over any one individual name in an ordinary fund’s portfolio, look no further than the stock that had everyone talking a year ago, Facebook, the hottest initial public offering since Google in 2004.

Never mind that IPO typically stands for “it’s probably overpriced,” investors don’t like missing out when something captures the market’s attention, and Facebook (FB) clearly had investors dreaming of big things.

Individuals wanting to buy in directly faced the typical struggle of initial public offerings, namely that they would flock in with the masses and likely miss out on the IPO “pop” that Wall Street typically manufactures to make every deal seem like a good one.

Once a stock pops — whether the move is a headline-maker or brief and dull — it typically settles back into what ultimately becomes a trading pattern as Wall Street decides what the business really is worth.

With Facebook, however, investors who expected big things went looking for funds that either had purchased shares pre-IPO or that were making no bones about their interest.

It seemed like a great idea, right up to the point where Facebook debuted, fell flat, created massive negative headlines and beat the tar out of the exuberant early entrants.

For fund investors a year later, there lies the lingering lesson of the Facebook IPO.

For the folks running index funds, once Facebook hit the benchmarks, it hit their portfolios, just another part of the market for them to follow.

For active managers, Facebook represented a decision about just where the hot IPO of the day fits into a fund’s portfolio.

Truthfully, the investors who profited most from Facebook may be the ones who bought in early to Firsthand Technology Value (SVVC), a closed-end fund known for having pre-IPO shares.

The fund more than tripled in value from the start of the year leading up to the May 18, 2012 IPO — and a savvy investor might have gotten out before Facebook had a chance to fall flat — and it finished 2012 with a gain of nearly 22 percent.

But in the year since the Facebook IPO, the fund is off more than 33 percent. Facebook still represents one of its biggest holdings.

Look at funds that were early Facebook adopters and the results are equally mixed.

Of the 19 traditional funds that reported having at least 2 percent of assets in Facebook during the second quarter of 2012, 11 rank in the bottom 11 percent of their peer group over the last 12 months, according to Morningstar. Two were merged out of existence.

Of the six remaining funds, three are in the top 20 percent of their asset class over the last year.

Flip it around and look at the funds that currently have the most assets committed to Facebook.

Ten of the 25-largest Facebook holders — based on percentage of assets in the company in their most recent portfolio reporting — are in the bottom 25 percent of their peer group in the last 12 months, according to Morningstar. Just six are in the top quartile.

It points to what savvy observers expected a year ago anyway, namely that the winners in the Facebook IPO — like most such offerings — would be the underwriters, and not the mutual-fund investors.

For shareholders, however, it raises a point, namely that if you want oversized exposure to a certain stock, dress your own windows by holding the individual stock outside of your funds.

As for what your funds hold, make sure it is consistent with your expectations, worrying more about the big picture than a few names.

If, for example, you expect a broadly diversified large-cap fund and find that it has an oversized chunk of, say, a Facebook or Apple (AAPL), that should alarm you.

The fund is taking on concentration risks you were not expecting, which could make results more volatile; typically, it will feel fine right up to the moment when those risks become real.

In the end, investors should use funds to capture the broad performance of a sector, asset class or entire market — and the expertise of a manager — but they shouldn’t be so worried about the individual holdings within a diversified fund.

A year later, Facebook’s IPO is an interesting memory, but it didn’t make or break fund investors. Their profits (or losses) over the last 12 months were much more about their big market/investment choices than about any one stock.

Chuck Jaffe is senior columnist for MarketWatch. He can be reached at or at P.O. Box 70, Cohasset, MA 02025-0070.

Copyright, 2013, MarketWatch