RS Emerging Growth Fund Manager Honored

James Callinan, whose $3.4-billion RS Emerging Growth Fund soared 183% last year, was named Morningstar Inc.’s 1999 domestic stock fund manager of the year Thursday--but the award should probably be taken with five stars of sand, depending on your time horizon.

Over the last five years, Callinan’s fund posted an average annual return of 43%, beating 99% of all U.S. mutual funds, according to Bloomberg.

Morningstar’s Web site called Callinan’s fund “remarkably consistent, even when expensive small-cap stocks haven’t had a strong tail wind.”

Callinan, 39, a former star running back at Harvard, started the year heavily invested in Internet companies but altered his focus in April when shares of many of those holdings reached highs.

“Early on we were very ‘dot-com’ oriented,” said Callinan, who added the fund started the year with holdings such as CMGI Inc., E-Trade Group Inc. and Lycos Inc.

In the spring, Callinan began to reevaluate the portfolio amid a run-up in Internet stocks.

“That’s when we started to say, ‘This is outrageous,’ ” he said Thursday, noting that he sold Lycos, CMGI and similar stocks and began to pick up shares of software companies bruised by year 2000 computer concerns.

Past winners of Morningstar’s award include Peter Lynch, the legendary former manager of Fidelity Magellan (who won in 1988), Shelby Davis, former manager of Davis NY Venture (who won in 1996), and 1998 winner Bill Miller, manager of Legg Mason Value, which continues to outperform.

But other 1990s winners such as Don Yacktman (Yacktman Funds) and Bob Rodriguez (FPA Funds) have struggled in recent years.

Five of the last nine winners who still manage mutual funds under-performed the Standard & Poor’s 500 index of blue-chip stocks--and the average domestic stock fund--last year.

Morningstar also said it selected American Funds’ EuroPacific Growth Fund team as international manager of the year and Jerry Paul of Invesco Funds Group as fixed-income fund manager of the year.