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quite candidly, he was not trying to achieve particularly good results, just not to look bad, just to stay with the crowd, no matter what the values. It’s the fear of that damn tracking error, again.

A number of the ten funds have made a point of commenting on their partners’ personal investments in the funds they manage – the ones I caught were Longleaf, Clipper, First Eagle, Oakmark Select, FPA Capital, and Tweedy Browne. One would think all mutual fund managers would do the same, but think again. (And we should know more about the size of those investments than we do.) It’s not just that a manager should not allow market timing and the like.63 By investing their personal dollars, they inevitably manage the fund with the acute interest in profit and the extreme aversion to loss that only someone with skin in the game will experience.

Several managers in our group have passed a further test of fiduciary duty, having closed their funds to new investors, rather than dilute the results for those already there. No manager bent on gathering assets would do that. Oakmark Select, Longleaf Partners and FPA Capital are closed now, and First Eagle Global has been closed in the past. Longleaf Partners has also closed its other funds, as has First Eagle its fund that is solely foreign.

Size impairs the object; it shrinks the number of companies with market capitalizations large enough to permit a fund to amass a significant position. It’s not how much money you manage but how you succeed with what’s there. Our select group seems to have latched onto that precept.

Graham and Dodd: Theme and Variations

The philosophy of these Graham-and-Dodd, value investors reflects some of the same insights that underlie behavioral finance. Graham, for example, recognized that subjective factors and market prices influence not just speculators but also those committed to a purely investment program. A few excerpts may capture the spirit of it.

The merits of an issue reflect themselves in the market price not by any automatic


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