Meet the Ryans, scattered fund investors like the rest of us

Reuters News
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Posted: Aug 16, 2012 11:58 AM
Meet the Ryans, scattered fund investors like the rest of us

By Ross Kerber

BOSTON (Reuters) - Paul Ryan and his wife have accumulated far more savings than the typical American couple, but they still face an all-too-common investing problem: holding an unwieldy collection of mutual funds.

Unlike finance whiz Mitt Romney, the Republican presidential candidate who just picked the Wisconsin congressman as his running mate, Ryan's financial life looks both jumbled and typical of many individual investors.

Ryan's net worth -- estimated as high as $3.2 million in 2010 -- was far above the median U.S. family's net worth of $77,300 for the same year.

But despite their riches, Ryan and his wife Janna appear to have made the same mistakes as many less wealthy investors: owning too many mutual funds that duplicate one another thereby increasing their costs and their risk.

It is easy for even wealthy families to wind up with "a patchwork of investments that is not a strategy," said Derek Holman, managing director EP Wealth Advisors in Los Angeles.

Several other financial advisers rolled their eyes at a June 6 disclosure in which Ryan listed investments held by himself and his wife.

These included more than 30 different funds, largely mutual funds, and a host of individual stocks, most held through investment partnerships.

Mutual fund holdings included stakes of up to $100,000 owned by Janna Ryan in both Fidelity Investments' famous Contrafund and T. Rowe Price Group's New Horizons Fund. The form also listed lesser amounts in funds like American Century Small Cap Value Fund, American Funds' EuroPacific Growth Fund and the Pimco Total Return Fund, the giant bond fund run by Bill Gross.

While some of the funds have done well and some poorly, many seem to duplicate each other or individually-owned stocks also listed in the filing, said Bill Mertes, chief investment officer of wealth adviser American Financial Advisors in Orlando, Florida.

Contrafund, for instance, has been a major buyer of individual stocks that Ryan also listed, such as Apple Inc and Google Inc. Almost all of the stocks are held through two investment partnerships.

In another instance, one of Ryan's partnerships is listed as investing in both Artisan International Fund and Harbor International Fund. The funds have many similar holdings such as: Japan Tobacco Inc, Anheuser-Busch Inbev SA and Nestle SA, according to fund-tracker Morningstar.

The overlap is typical for many investors, Mertes said. "He has great assets and access to a lot of smart people," Mertes said. But, "You can tell he doesn't really have a plan. That's very common."

Ryan's financial life has drawn much political scrutiny since he was named Romney's running mate over the weekend. But from a personal-finance perspective, the disclosures point to more mundane and universal questions about how well the couple has managed their assets.

Although Ryan chairs the House Budget Committee, it may be that even the wonkiest of politicians is no investment whiz.

RYAN'S NET WORTH

A spokesman for Ryan, Brendan Buck, declined to comment on the holdings in detail, making it hard to evaluate Ryan's exact investment strategy or how the holdings balance his family's goals. He also would not say whether the Ryans use a financial adviser, though he did say Paul Ryan "has no role" in the partnerships' investment decisions.

Ryan's disclosure forms are posted on the opensecrets.org website maintained by the Center for Responsive Politics in Washington, D.C.

For 2010 the organization estimated Ryan's net worth at between $927,100 and $3.2 million. Since then, Ryan disclosed that his wife received an interest in a family trust worth between $1 million and $5 million, according to the June 6 filing. Ryan omitted details of how the trust funds are invested, a decision supported by a House Ethics Committee attorney, the filing stated.

The amounts are rounding errors compared to the much wealthier Romney. But they also put Ryan in the same company with many other well-off investors who rely heavily on mutual funds to gain access to the markets - sometimes more than advisers suggest.

Households with incomes of more than $150,000 that owned mutual funds held a median of six funds, according to surveys by the Investment Company Institute, a fund industry trade group. Of such households, 23 percent owned seven to 10 mutual funds and 24 percent owned 11 or more mutual funds.

Keeping track of the funds can be tricky, warned Dawn Bennett, a financial adviser in Washington, D.C. whose clients include political and government professionals

The Ryans should rethink some underperformers, she said. For instance, Janna Ryan held an investment of between $15,001 and $50,000 in the Hartford Capital Appreciation Fund plus additional shares through an IRA.

But the fund trailed 97 percent of peer funds for the 12 months ended August 13, according to Morningstar, and 98 percent during the last three years.

"They haven't cleaned up their weaker mutual funds," Bennett said.

STAYING ONSHORE

Bennett also said the Ryans seemed excessively weighted to U.S. stocks, which would have held back their portfolio in recent years as emerging markets grew faster. This year, the trend reversed and benefitted U.S. holdings, to be sure. Staying domestic can be easier for political figures by avoiding potentially controversial foreign investments, however, Bennett said.

Politicians also often use mutual funds to avoid potential conflicts of interest.

In his 2011 disclosure, President Barack Obama listed investments in the Vanguard 500 Index fund, plus portfolios run by Pimco and Calvert Investments, part of 529 college-savings plans for his children. The largest amount of Obama's assets were in U.S. Treasury notes, between $1 million and $5 million, according to the filing.

In Ryan's disclosure, one large transaction in 2011 moved money within the Wells Fargo Advantage Funds EdVest 529 College Savings Plan.

The money, between $100,001 and $250,000, was moved from an "aggressive" portfolio to a "moderate" portfolio - a typical transaction made by parents as children age and get closer to the time when the money would be needed for college tuition.

The Ryans' three children are 10, 9 and 7 years old, said spokesman Buck.

(Reporting by Ross Kerber; Editing by Aaron Pressman and Leslie Gevirtz)