Further Analysis of the Laudus Rosenberg Fund

Michael Markov and Kushal Kshirsagar

In our earlier post (referenced in a story from Jeff Sommer of The New York Times) we performed an analysis of the Laudus Rosenberg US Large Cap mutual fund (sub-advised by AXA Rosenberg) that indicated a significant change in the fund’s risk profile occurred as early as 2008. Our study showed a substantial increase in the daily tracking error of the fund to its benchmark – the Russell 1000 Index. The tracking error reached its peak in June 2009 and was several times higher than many of its quant Large Cap Core peers. So there was a symptom that could have alerted risk managers or investors to potential problems. Note that this symptom became apparent only on shorter-horizon (daily temperature charts) rather than two-year averages commonly used by many practitioners.