(PUB) Investing 2015

18

Closed, Not Closed Tracking Morningstar Analyst Ratings | Russel Kinnel

a fine strategy for protecting against the down- side, but it means the funds will lag in a rally. Maybe asset size is a bit of a hindrance, but I doubt it’s playing a major role. In any case, both funds are now in redemptions. AMG Yacktman Focused saw $1 . 9 billion in outflows over the past 12 months, and AMG Yacktman has had $1 . 2 billion go out the door. The difference in their analyst ratings is because AMG Yacktman Focused charges a full 50 basis points more than AMG Yacktman. Oakmark Global OAKGX Managers Clyde McGregor and Rob Taylor ply the Oakmark strategy across the planet. They want strong businesses trading for cheap prices. They look to same-industry buyouts to verify the correct multiples for companies. The portfolio has mostly classic value names like Union Pacific UNP and Credit Suisse CS , but there are some growth favorites like Samsung thrown in to boot. Over time they’ve produced excel- lent relative performance in bear and bull markets alike. The fund is still getting a trickle of inflows with $120 million in inflows over the past 12 months. Vanguard Wellington VWELX This remains one of the great bargains of the fund world. You can tap Wellington’s great stock and bond management resources for just 0 . 26% a year. It, too, has had very few missteps. Flows have slowed to $463 million in the past year, and that’s a good thing for a $91 billion fund. Wasatch Small Cap Growth WAAEX Jeff Cardon has built a remarkable record over nearly 30 years at this fund. He looks for financially healthy companies with strong growth potential, but he pays attention to valuations, too. My greatest concern is that Cardon could retire sometime soon, even though he says he has no plans to do so. The fund also has a wild card in the form of a 9% stake in India, which is pretty unusual for a U.S. small-cap fund. œ

In recent years, fund companies have experimented with various ways of closing funds. One thing I’ve seen more often is funds closing their doors halfway. They close the fund to investors using fund super- markets but leave them open to those who invest directly with the fund company. This really serves two purposes. First, it slows down the rate of inflows. Second, it leaves more profits for the fund company because it doesn’t have to pay a No Transaction Fee plan provider like Schwab or Fidelity the usual 35 basis points in fees. I don’t really mind the practice, except that whenever I write about those funds, some readers complain to me that the funds are closed because that’s what it says when you pull up the fund in the NTF supermarkets. So to clear the decks, I thought I’d write about a few of the very best funds in this camp. If you don’t already have an account with that firm, you’ve got to decide whether it’s worth the extra difficulty of having another account. AMG Yacktman Focused YAFFX and AMG Yacktman YACKX The funds have transitioned largely from Donald Yacktman to his son Stephen Yacktman, but we still give them Morningstar Analyst Ratings of Silver and Gold, respectively. They saw a surge in popu- larity that prompted them to close the funds to NTF programs a few years ago. And that’s a good thing; they run focused portfolios, yet assets grew to more than $10 billion in both funds. Since then, the funds have lost some luster; they’ve lagged their peers significantly over the trailing three- and five-year periods. However, I don’t blame the transition or the asset growth. Instead, it’s really a matter of style. The managers are cautious value investors who will build cash if they can’t find enough attractive investments. It’s

What Are Morningstar Analyst Ratings?

Our ratings are chosen for long- term success. Analysts assess a fund’s competitive advantages by analyzing people, process, parent, performance, and price. They do rigorous analysis and then submit their ratings to a committee that vets their work for thoroughness and consistency.