July 21, 2015

by Larry Swedroe

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Mario Gabelli is one of the highest paid executives in America, having earned $88.5 million in 2014 – more than the leaders of all other publicly traded asset-management firms. But have the investors in his mutual funds been as richly compensated when compared to what they would have earned in comparable, passively managed funds?

With this installment of my series on the ability of actively managed fund families to add value through the generation of alpha, I will answer that question. What follows is an in-depth examination of the Gabelli family of funds.

[drizzle]This article was triggered by a recently published article in The New York Times that questioned the fund family’s governance. There’ll be more on that article later.

But first, a little background. The Gabelli family of funds was founded in 1976 by Mario Gabelli. The firm’s website reports that its total assets under management are now more than $49 billion, of which approximately $18 billion is in mutual funds (according to Morningstar as of May 31). It goes on to state: “The driving force of our success has been our intense research-driven culture. The keys to our success are the same today as they were in 1976: a focus on fundamental bottom-up research, a consistent investment process and a commitment to generating superior risk-adjusted returns.”

As is my practice, I will begin my analysis by evaluating the performance of Gabelli’s actively managed equity funds relative to similar offerings from two prominent providers of passively managed funds, Dimensional Fund Advisors (DFA) and Vanguard. (Full disclosure: My firm, Buckingham, recommends DFA funds in constructing client portfolios.)

In an effort to both keep the list to a manageable number of funds and to make sure I examine long-term results through full economic cycles, my analysis will cover the 15-year period from April 2000 through March 2015. Per usual, I’ll use the lowest-cost shares when more than one class of fund is available for the full period. In cases where Gabelli has more than one fund in the asset class, I’ll use the average return of those funds for the purposes of our comparison.

The table below shows the performance of 11 equity mutual funds managed by Gabelli across five asset classes. They include 10 domestic funds and one international fund.

April 2000-March 2015

Fund Symbol Annualized Return (%) Expense Ratio (%)
U.S. Large-Cap Blend
Gabelli Asset GABAX 7.5 1.35
Gabelli Value 25 GABVX 6.5 1.38
Gabelli Equity Income GABEX 8.1 1.37
TETON Westwood Equity WESWX 5.8 1.59
Gabelli Average 7.0 1.42
DFA U.S. Large Company DFUSX 4.1 0.08
Vanguard Institutional Index VIIIX 4.2 0.02
U.S. Large-Cap Growth
GAMCO Growth GABGX 1.0 1.43
Vanguard Growth Index VIGIX 3.2 0.08
U.S. Large-Cap Value
TETON Westwood Income WESRX 9.9 2.00
Gabelli Dividend Growth GABBX 4.6 1.89
Gabelli Average 7.3 1.95
DFA U.S. Large Cap Value III DFUVX 8.8 0.13
Vanguard Value Index VIVIX 5.7 0.08
U.S. Small-Cap Blend
Gabelli Small Cap Growth GABSX 10.7 1.38
TETON Westwood Mighty Mites WEMMX 10.0 1.43
TETON Westwood SmallCap Equity WESCX 2.4 1.50
Gabelli Average 7.7 1.44
DFA U.S. Small Cap I DFSTX 9.0 0.37
Vanguard Small Cap Index VSCIX 8.4 0.08
International Large-Cap Blend
GAMCO International Growth GIGRX 2.0 2.20
DFA Large Cap International DFALX 3.0 0.28
Vanguard Developed Markets Index VTMGX 3.0 0.09

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