June 5, 2012 / 9:52 PM / 5 years ago

BlackRock's bull retires as equity markets flounder

* Doll says markets “haven’t been a whole lot of fun”

* Lackluster performance caused board scrutiny

By Jessica Toonkel

NEW YORK, June 5 (Reuters) - The U.S. stock market has already lost some of its bulls in the past month. Now it is about to lose one of its biggest.

BlackRock Inc ’s chief equity strategist Bob Doll told Reuters on Tuesday he was leaving the firm and the three funds he manages because he wanted to take some time off and the fun was gone.

“The markets haven’t been a whole lot of fun,” the 57-year-old Doll said, adding he hoped to figure out his next move.

Best known as the talking head of for BlackRock’s views on the markets and for his annual market predictions list, Doll’s bullish nature and love of fundamentals have not helped the performance of the three funds he oversees, each of which has underperformed its benchmarks for the past one, three, five and 10 years, according to Morningstar Inc.

With the European debt crisis raging on, disappointing U.S. job creation numbers and the Dow Jones Industrial Average in negative territory for the year, and market volatility heightened, it might seem like a good time for a bull like Doll to walk away.

But for BlackRock, which has relied on Doll to assuage investors’ concerns and answer financial advisers’ questions about the markets, the departure comes at an inopportune time.

“Bob Doll and Bill Gross (co-chief investment officer at PIMCO) were the two people who were out there talking to investors during the financial crisis,” said Don Phillips, president of fund research at Morningstar Inc. “He was pretty important to the firm.”

A PERENNIAL BULL

Every year, Doll has come out with 10 predictions that were almost entirely positive and, lately, off the mark.

In 2011, Doll predicted accelerating economic growth, double-digit stock growth and 3 million new jobs. His S&P forecast was too optimistic by 100 points, growth slowed in 2011 and 1.8 million jobs were created in 2011.

CXO Advisory Group LLC, a research firm that tracks more than 60 market “gurus”, gives Doll an above average accuracy rating of 54 percent.

This year Doll predicted that the European debt crisis would ease, even as Europe slides into a recession. “I know the second half of that is correct,” he said.

Still, Doll - a regular commentator on CNBC - acknowledges that being a fundamentals-focused equity manager has not been easy lately. ”Everything is so macro-focused and it’s less about the individual companies, he said.

The performance of 23 developed-market stock indices compared to the MSCI World index shows a significant increase in correlation, from about a .5 correlation in the early 1980s to nearly .9 percent in recent months, according to Rui Antunes, a quantitative analyst at Societe Generale in London.

When correlation is so high, economic forces hold more weight in the price of stocks than actual health and future prospects of any individual company or sector.

FALTERING PERFORMANCE

Doll’s difficulties are evident in the track record of the portfolios he manages.

While he was a star manager in the early 2000s , his performance since he joined BlackRock as part of the merger with Merrill Lynch Investment Managers i n 2006 has been lackluster.

From 2000 to 2005, his Large Cap Growth Fund lost 2.1 percent, while large cap growth funds averaged a 27 percent loss, according to Morningstar.

But for the past one, three, five and 10 years, his $1.6 billion Large Cap Core Fund ; $1 billion Large Cap Growth Fund and $1 billion Large Cap Value Fund have all underperformed their benchmarks, according to Morningstar Inc.

The poor performance has drawn intense scrutiny from the funds’ board of directors, who meet quarterly to review the funds’ strategies, each of which is based on a quantitative model.

“They were concerned about how the models were being run, how the analysts picked stocks, what the risk management was,” Doll said.

As a result, BlackRock made some changes to the funds in 2010, when it brought on Peter Stournaras and Chris Leavy.

Stournaras and Leavy will take over Doll’s responsibilities after his June 30 departure. Doll will serve as an adviser to the firm through the rest of the year.

As for Doll, he has summer plans to go to Paris with his wife to visit their daughter, spend time with family in Texas, and vacation at the New Jersey shore.

After that, Doll said he isn’t sure what’s next for him.

Whether BlackRock will find someone new to hold investors’ hands during volatile times is unclear. The firm has expanded into passive management through its acquisition of the iShares exchange-traded fund business and over the years has grown its fixed income business as well.

“Doll stands for equities and actively managed funds and given how BlackRock has evolved maybe it’s time for them to have a different face,” Phillips said. (Reporting By Jessica Toonkel; Editing by Jennifer Merritt, Walden Siew and Leslie Gevirtz)

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