By John Spence, MarketWatch
BOSTON (MarketWatch) -- With global markets still reeling after a spring sell-off, mutual fund managers and financial advisers descending on Chicago Wednesday for the start of Morningstar Inc.'s annual conference will be looking for insight on how best to ride out the storm.
"At previous conferences we've tended to focus on subtle, nitty-gritty topics like the differences between small-cap strategies, but this year it's all about the big picture," said Don Phillips, managing director of the investment-research company. /zigman2/quotes/209325896/composite MORN +1.13%
"This year has been a wild roller-coaster ride for investors," Phillips said. "So topics will include where to find value today and how to navigate these choppy waters."
After riding solid gains in domestic and international markets the past couple years, investors have been jolted by the recent correction triggered by concerns over higher global interest rates and slowing economic growth.
For the 13-week period ended June 20, the S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.28% is off 4.6% and the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.63% is down 9%. Much of the damage has been inflicted overseas in once-hot developing economies as emerging-markets funds lost more than 10% over the past three months.
With volatility ratcheting up in worldwide markets, Phillips noted the conference themes this year are "more strategic than tactical."
For example, the opening address to be given Wednesday by Michael Mauboussin, chief investment strategist for Legg Mason Capital Management , will focus on maintaining a long-term perspective in a world that increasingly stresses short-term results. Mauboussin said he plans to cover "the information overload which is a big reason behind the common investor error of buying what's been performing the best recently."
"The message is that less activity is often better than more," he added. "Investors need to be aware of what's going on in markets to recognize the context in which they make decisions."
Companies, investors and asset managers are all guilty of what Mauboussin calls "short-termism." Corporate chieftains obsess over hitting quarterly numbers with their compensation closely linked to the share price due to stock options they've been granted.
Meanwhile, many investment managers have moved from specialized boutique shops to public conglomerates. As a result, performance has suffered as they spend less time managing money and more time marketing and gathering assets to generate fees, according to Mauboussin.
Finally, numerous studies have shown mutual fund investors consistently trail market indexes because they have a poor record at timing market moves. Their biggest mistake, he says, is "recency bias," or extrapolating near-term results into the future without considering shifting market trends.
On the agenda
After Mauboussin's opening address Wednesday, keynote speeches later in the week from Bill Nygren of Oakmark Funds and Paul McCulley from Pimco are also on tap at the Morningstar Investment Conference, which runs through Friday.
Nygren, co-manager of $5.5 billion Oakmark Fund /zigman2/quotes/203815081/realtime OAKMX +0.47% , is known for his deep-value investment style. The portfolio manager, who has spoken at previous Morningstar forums and is a favorite among the firm's fund analysts, is "an original, creative thinker about the market," said Morningstar's Phillips.
Yet the Oakmark Fund has been in a bit of a rut in recent years -- its 3-year annualized return of 7.4% through June 20 places it in the bottom 10% among its large-cap value peers, according to Morningstar.
"We try not to focus on funds just because they've been hot recently, and Nygren's style has been out of favor," noted Phillips. "We like managers that stick with their strategies even when they're not paying off in the short term," he added. Through a spokesperson, Nygren declined to comment on his upcoming speech.
Pimco's McCulley also turned down an interview request before the conference, but Phillips said he'll likely address the outlook for fixed-income markets.
In a nod to the growing popularity of hedge-fund strategies, Morningstar will be hosting its first panel on long-short funds that seek to gain in any market environment.
Additionally, groupies of legendary investor Warren Buffett won't want to miss a presentation by fund managers who follow his approach of finding undervalued companies with great brands. Value mavens Bruce Berkowitz of Fairholme Fund /zigman2/quotes/200889155/realtime FAIRX +1.60% , Wally Weitz of Weitz Value Fund /zigman2/quotes/200159845/realtime WVALX +0.35% and David Winters of Wintergreen Fund are the scheduled presenters.
There will also be a session on "undiscovered" portfolio managers such as Scott Brayman of Champlain Small Company Fund /zigman2/quotes/200762617/realtime CIPSX +2.46% , Tom Putman at FAM Value Fund /zigman2/quotes/200830531/realtime FAMVX +1.15% and David Scott of Chase Growth Fund /zigman2/quotes/201327320/realtime CHASX +0.73% who have racked up enviable records under the radar at smaller funds that can remain nimble.
"Fund flows are concentrated in big players, but investors love to find good managers off the beaten path," Phillips said.