Your Funds: Seeing the ghosts of mutual funds passed

No one cries when a mutual fund dies. There is no wake. If there is an obituary — in the form of some small announcement that the investment has passed — it seldom contains information on the cause of death.

And yet, each year, hundreds of funds are closed. Counting all share classes, the bell tolled for about 1,000 traditional mutual funds and exchange-traded funds that were liquidated or merged out of existence in 2012. The departed are a motley mix of the uninspired, goofy, mediocre, the marketing failures and the big mistakes, along with a few good performers that just never clicked with the public.

Most deserved to perish unnoticed, but a few left legacies and lessons that should not be forgotten, lest investors repeat those mistakes in the future. With that in mind — and in the spirit of year-end retrospectives about famous people who died in the past 12 months — it’s time to dip into the year’s dead pool for tales from the fund crypt.

Among the funds that passed in 2011:

Yieldquest Total Return Bond: It’s not the above-average costs and below-average returns that stood out for this horrific loser; its wild losing streaks when it could drop 10 percent in a week that had investors wondering what the heck was going on. A loser over its entire history, the fund dumped more than 70 percent of its value in the last year of its life.

Global X Food: This ETF — one of eight Global X theme-driven ETFs shuttered in February — proved two points in its short life.

First, in the rapidly expanding world of ETFs, anything that sounds like a gimmick and that doesn’t draw assets will be quickly discarded, which is why investors should wait to see if a new issue has some staying power before diving in.

Second, the fund had a noble mission — Global X planned to donate any profits earned on the fund to Action Against Hunger International — but issues with higher purposes have a tough time completing their real objective, making money for investors. In general, investors are better off picking the best funds, and donating some excess profits directly to their favored charities.

AdvisorShares Dent Tactical ETF: The mutual fund graveyard is dotted with issues run by prognosticators, stock jockeys, hedge-fund bosses, newsletter editors and others whose reputations were built doing something besides managing a mutual fund.

Harry Dent is best known as a forecaster, using demographic trends to make big-picture calls with mixed results. His first mutual fund shuttered in 2005, and his new ETF was no better, losing 13.5 percent in its last 12 months before being liquidated in August.

Relevant experience matters; if it didn’t, the Kardashians would have a mutual fund and it would be nearly the same as putting money with Dent and other fund-celebrity novices.

Thunderstorm Value: Run by John Dorfman — a longtime money manager best known for being a syndicated columnist and financial talking head — this fund had good performance (up 22.5 percent in the three years leading to its February shutdown) but never drew sufficient assets to survive long-term.

Thus it expands on the lessons taught by the Dent fund, because even in the case where a celebrity actually is known for running money, like Dorfman, if the reputation isn’t big enough to bring in real dollars, the fund won’t survive for long.

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