Q. Do you think that the Davis New York Venture Fund is worth putting money into?
K.T., via the Internet
A. Although only an average performer this year, this fund has a solid long-term track record. It communicates its strategies well to shareholders and keeps its expenses reasonable.
The fact that more than 40 percent of its portfolio is in financial stocks could be a problem, but at least that sector has a mix of banks, insurers and brokerages that exhibit their own individual traits.
Through Monday, the $39 billion Davis New York Venture Fund (NYVTX) had returned 18 percent over the past 12 months to rank in the upper half of large growth and value funds. Its three-year annualized return of 14 percent put it in the top 10 percent of its peers.
“While it might not be aggressive enough for some, it is a large-cap fund worthy of being a core holding in most investors’ portfolios,” said Kerry O’Boyle, analyst with Morningstar Inc. “Companies with good management teams are important to its portfolio managers, who have especially gotten to know the management teams in the financial arena.”
Portfolio managers Christopher Davis and Kenneth Feinberg were named Morningstar’s Domestic Equity Fund Managers of the Year in 2005. The Davis family owns the firm; its managers, analysts and directors have a significant portion of their own money invested in the funds.
They seek companies whose shares are temporarily depressed in light of what they consider their intrinsic value. Portfolio turnover is low and volatility kept to a minimum.
Besides the hefty portion of fund assets in financial services, other meaningful concentrations are in consumer goods, energy and consumer services. Top holdings were recently Altria Group, American Express, ConocoPhillips, American International Group and JPMorgan Chase.
This 4.75 percent “load” (sales charge) fund requires a $1,000 minimum investment and has an annual expense ratio of 0.87 percent.
Q. With interest rates going up the last couple of years, I’ve wondered why the government raises them.
More Top Picks Best Linen Curtains For Living Rooms
G.C., via the Internet
A. The government through the Federal Reserve adjusts the federal funds rate, an overnight bank lending rate that affects the interest rates on credit cards, car loans and home-equity lines of credit.
Recently that rate has been flat. The Fed stopped hiking it amid a cooling housing market and falling oil prices.
“If the policymakers feel inflation is too high or accelerating, they’ll raise interest rates and that will slow economic activity,” said Mark Zandi, chief economist for Economy.com in West Chester, Pa. “Their ultimate objectives are to ensure slow and stable inflation and to have an economy that is growing at its potential.”
While the fed funds rate influences most other rates, it doesn’t determine them. It also has less effect on long-term rates, which are influenced by broader economic factors.
———-
Andrew Leckey is a Tribune Media Services columnist. E-mail him at [email protected].