This graph shows you how the investment styles of the Magellan fund shifted
over these periods, right, progressively increasing its exposure to large
growth stocks and decreasing its exposure to small-cap stocks during the 80s, right.
Now this is not surprising, because as the fund grew, right,
it became increasingly difficult to invest in small stocks.
So the style analysis, as a tool, right, can be used in many different ways.
It's informative in many different ways.
For example, right, as I showed, often funds may have a stated objective,
but a style analysis can be used to determine whether a fund
strategy does actually follow this stated objective or
whether it has deviated from the stated objective.
Two, right, it can be used, right, the style analysis gives you a tool
to create a true benchmark for the portfolio in question, right,
rather than some arbitrary benchmark like the S&P 500, right.
Put differently, it helps us to evaluate what part of the portfolio
return can truly be attributed to selection rather than style, right.
As I said before, right, this is the part, the selection,
right, this is the part of the fund return, right,
that the manager should get compensation for, right.
After all, we can very easily create the same style mix by holding simple right,
passive indices for the same styles, right.
And finally, it provides a more accurate picture of the exposures of a fund,
right, that you may be investing in, and therefore, it is informative
in evaluating how this fund best fits with your overall portfolio.