Investing in Funds: A Monthly Analysis; Real-Estate Investing: Homesick; Star manager sees steep price declines looming for once-hot regions -- but no U.S. recession
This summer's big story strikes all too close to home: the collapse of the subprime-mortgage market and the impact on real-estate values across the country.</br></br>To make sense of the tumult, we turned to Kenneth Heebner, who since 1994 has managed the $1.7 billion CGM Realty Fund. It has the best 10- year record of all real-estate-focused mutual funds, up an average 19.7% a year during the past decade, according to Morningstar Inc.</br></br>We first spoke to Mr. Heebner in July 2006, when he predicted that a swelling number of homeowners would default on risky mortgages, causing a "loud pop" in parts of the country. So how does Mr. Heebner, 66, now view the landscape?</br></br>The bad news is that he is sticking by one of his predictions that has yet to materialize: 50% price declines in some of the once-hottest regions. The good news: He doesn't see a recession ahead, thanks to strong global growth.</br></br>Mr. Heebner is well positioned to talk about prospects for the housing sector. His fund views its mission more broadly than most rivals, so he feels no pressure to make do with the best of a bad, narrowly defined real-estate lot. His fund, for instance, owns more coal-mining stocks than real-estate investment trusts these days. (Coal companies own a lot of land.)