Fortune has a great article on Eddie Lambert, who happens to be the best performing Hedge Fund thus far in 2012 after a rough 2011. While three months performance doesn’t make him a genius, one bad year doesn’t make him incompetent either.
The only way to assess a money manager is through understanding the investment process, and/or a long term track record consistent with that process. Track record alone is not enough because there a lot of scams out there where investment managers have 30 different funds with different methods and they sell the one or two that are showing strong performance. These types of funds usually have high fees and a trading strategy that makes no sense.
The beauty of value investing is that the process is understandable and repeatable. Over the long term it tends to outperform by a significant margin. The people that aren’t successful with a true value investor typically don’t allow the proper time horizon for the investments to mature. Bruce Berkowitz last year was named Morningstar’s fund manager of the decade, and his assets swelled dramatically only to have by far away the worst year of his career in 2011. Clients abandoned his fund in droves yet in 2012 he is one of the top performing managers, and I’d fully expect him to do quite well in the next decade because of the method he uses. Below is a link to the article on Lambert: