(PUB) Investing 2015

Morningstar FundInvestor

May 2015

13

Vanguard TIPS Fund Enjoys Strong Stretch Leaders & Laggards | Robert Goldsborough

and corporate bonds. Investors’ biggest concern here should be price volatility from rising rates.

Laggards Artisan Small Cap Value ARTVX ´ -rated Artisan Small Cap Value is in a prolonged slump. Its managers favor firms with strong balance sheets, which has been a major headwind in a low-interest-rate era that has rewarded leveraged firms, and made missteps in the energy and techno- logy sectors, failing to keep up with a changing land- scape and hanging on to some well-valued firms too long because of a dearth of attractive new ideas. This fund has trailed 97% of small-value peers over the past year, and its most experienced manager plans to retire in 2016 and be replaced by a far less seasoned lead manager. Despite rapid outflows here, Artisan deserves credit for not reopening this closed fund until small caps’ valuations are appealing. Matthews Asian Growth & Income MACSX Œ -rated Matthews Asian Growth & Income has lagged rivals for stylistic reasons. The fund tilts toward attractively valued, conservative securities like dividend-paying stocks and convertible bonds, and such investments typically underperform bolder equities during stock rallies. The fund has trailed 82% of its category peers over the past year and two thirds of rivals since the start of 2015 . A relatively light stake in China has also left it behind peers. Over the long term, the fund’s broad and conservative asset mix should help keep volatility low. PIMCO Emerging Local Bond PELAX This fund’s Morningstar Analyst Rating recently was downgraded to ´ from Silver after it suffered several key manager departures and its Perform- ance score was lowered to Neutral from Positive. Focused on local-currency emerging-markets debt, the fund outperformed its peers from 2009 through 2011 after manager Michael Gomez made successful duration bets relative to the bench- mark and benefited from a higher-quality portfolio during 2011 ’s volatile third quarter. Since 2012 , the fund has struggled for several reasons, including its heavy exposure to Brazilian debt. K Contact Robert at robert.goldsborough@morningstar.com

Leaders Eventide Gilead ETAGX

Ten Best-Performing Funds

Fund Name

YTD Cat Rank %

This socially responsible mid-cap growth fund, with a Morningstar Analyst Rating of x , has been on a hot streak of late, owing to terrific stock selec- tion, including electric carmaker Tesla Motors TSLA and several smaller-cap biotech firms. The fund has bested 98% of mid-growth peers over the past year and 99% of rivals in trailing three- and five-year periods. Guided by religious and social screens and a positive screening approach that assesses firms’ values and cultures, the fund’s managers have done a fine job navigating the market. The fund does have a fairly high price tag and courts far more vola- tility than its average peer. American Funds SMALLCAP World SMCWX This ´ -rated fund has topped 87% of world- stock peers over the past year, although most rivals hold large caps and not small caps. Its managers have boosted their stake in the red-hot biotech sector of late, which has boosted performance and increased the fund’s growth tilt. Downside protection remains a concern, although some other aspects, including a low fee hurdle and the managers’ lengthy tenures, are reassuring. The fund’s multimanager approach should mute the inherent volatility to some degree. Vanguard Inflation-Protected Securities VIPSX Greater duration has led to solid returns at this fund. Manager Gemma Wright-Casparius has beaten almost nine out of every 10 peers over the past year by giving this Treasury Inflation-Protected Securities- only portfolio a longer average duration than its benchmark and its average peer. The secular decline in interest rates has benefited the fund, although that higher duration means more sensitivity to short- term price movements. Unlike its peers, this fund sticks to TIPS only and shuns instruments like mort- gage-backed securities, emerging-markets debt,

Ten Worst-Performing Funds Fund Name YTD Cat Rank % Longleaf Partners Interna 100 Matthews Emerging Asia In 100 Vanguard Long-Term Invest 100 CGM Focus 99 Janus Contrarian T 99 Oppenheimer Global Opport 99 AMG Yacktman Focused Serv 98 AMG Yacktman Service 98 Artisan International Val 98 Loomis Sayles Bond Retail 98 1 PIMCO Investment Grade Co 1 Sequoia 1 T. Rowe Price Global Tech 1 Vanguard Capital Value In 1 Artisan International Sma Fairholme Focused Income Franklin Mutual Beacon A Longleaf Partners Small-C Morgan Stanley Inst Growt Oakmark International Sma 1 1 1 1 1