(PUB) Investing 2015

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Hotchkis In, Fidelity Out Changes to the 500 | Russel Kinnel

long-standing involvement with this strategy lessen the chance of disruptions to the fund.

Even so, it will take some time to see how a few moving parts come together. David Daigle took the reins on the fund’s high-yield stake ( 9 . 5% of assets as of Dec. 31 , 2014 ) in late 2014 and will likely employ a more opportunistic style than predecessor Mark Linden. Brett will likely take a more concentrated approach to corporate debt than Dalzell. Lastly, the portfolio’s analyst-run sleeve is growing closer to 15% of assets from 12 . 5% . Each of those changes appears incremental, but it bears watching how they’ll affect the fund’s risk/reward profile in aggregate. Manning & Napier Funds Reconsidered In light of the structural changes going on at Manning & Napier, we are in the process of reviewing our ratings on all of the firm’s funds. Just before we published this issue, we lowered our ratings on Manning & Napier Equity EXEYX and Manning & Napier World Opportunities EXWAX to Bronze from Gold. The firm has reorganized its fund management teams, and two senior investment professionals have left the firm. The firm moved to smaller management teams in an attempt to avoid groupthink, and it also promoted Ebrahim Busheri to director of investments. In the long run, the changes may prove positive, but with so much in flux at the moment, the lower rating is more appropriate for Manning & Napier Equity and Manning & Napier World Opportunities. We will complete the rerating process in April. œ

Hotchkis & Wiley High Yield Joins M500 I’m adding Hotchkis & Wiley High Yield HWHAX to the Morningstar 500 . The fund, with a Morningstar Analyst Rating of Bronze, is run by former PIMCO veterans Ray Kennedy and Mark Hudoff. The fund has outperformed its peers since its 2009 launch, yet it has a modest $2 . 5 billion asset base. Both managers invest more than $1 million in the fund. The fund is available in many No Transaction Fee fund supermar- kets. See the facing page for more details. Fidelity Municipal Income 2015 Goes Out To make room, I am taking out Fidelity Municipal Income 2015 FMLCX , which is set to liquidate on schedule in June 2015 . Designed to have a bond- like maturity yet offer the diversification and professional management of a mutual fund, the fund didn’t really catch on with investors, though it is a clever idea. Global Bond Fund Downgraded We lowered our Analyst Rating on American Funds Capital World Bond CWBFX to Neutral from Bronze. About one third of the fund’s assets are now in the hands of new managers. The fund’s new principal investment officer, Thomas Hogh, won’t be making big changes to its approach. He worked on this fund alongside predecessor Mark Dalzell for nearly 20 years and has generated very similar results at a near-clone since October 2006 . Manager Mark Brett has rejoined the fund following a stint from January 1998 through March 2001 and hasn’t made wholesale changes to Dalzell’s sleeve of the portfolio. Brett serves as lead manager at American Funds Intermediate Bond Fund of America AIBAX and heads up the portfolio strategy group that shapes portfolio positioning across all of American Funds’ bond funds. That role and his

What is Morningstar FundInvestor 500 ? The Morningstar FundInvestor 500 features the industry’s best and most notable funds. Use the list to get new in- vestment ideas and track the funds you already own. FundInvestor subscribers have access to one-page monthly reports on all 500 funds on mfi.morningstar.com. Just type in the name or ticker of the fund in the search box.

Summary of Changes Add

Drop

Hotchkis & Wiley High Yield

Fidelity Municipal Income 2015

Rating Change From American Funds Capital World Bd ‰ ´ Eventide Gilead ‰ — Manning & Napier Equity ´ Œ Manning & Napier PB Cnsrv ˆ Œ Manning & Napier PB Extnd ˆ Œ Manning & Napier PB Mod ˆ Œ Manning & Napier World Opp ´ Œ To