(PUB) Investing 2015

June 2015 Vol. 23 No.10

FundInvestor Research and recommendatio s for the s riou fund investo

SM

Fantastic 50

Parent grade of Positive. You want a good steward with a strong investment culture when you invest for the long haul. Returns above the fund’s benchmark. The best time period for looking at a fund is the manager’s tenure rather than a standardized time period. So, I start with the earliest start date of the managers on a team and insist that the fund beat the benchmark over that time period. I used returns through April 2015 . There is a minimum five-year manager tenure, too, to weed out those with less meaningful track records. Finally, I throw out institutional share classes to help you get a list you can use, and I select the cheapest retail share class. I didn’t exclude closed funds because many people still own them and would welcome confirmation that they are on the right track. Newcomers We have seven newcomers and five funds that fell off last year’s Fantastic 48 , thus leaving us with a total of 50 this year. Let’s start with the newbies. American Funds New Economy ANEFX Declining expenses got the fund past the one hurdle that kept it off of the list in prior years. The fund charged 0 . 87% in 2012 and then dipped to 0 . 83% in 2013 and 0 . 79% in 2014 . It holds appeal as one of American Funds’ smaller funds with $16 billion in assets. We rate it Gold for its seasoned team and sensible approach. Its goal is to span the globe in search of innovative companies trading at reason- able prices. The fund consistently invests about a

RusselKinnel, Director of Fund Research and Editor

Fund Reports

5

It’s time once more for my annual screen for fantastic funds. The idea is to be very picky and very quantitative. I set up a list of key demands I have for a fund and then see how many pass. This year, only 50 funds out of a universe of nearly 8 , 000 passed my tests. Here are the screens: Cheapest quintile of category. Past studies show that funds in the cheapest quintile are a much better bet than the rest of the investment world, so this is the first test. Manager investment of more than $1 million in his or her fund. We have tested this and found that funds where at least one manager has invested more than $1 million of his own money are more likely to outperform than those without such alignment of interest. Morningstar Risk rating below the High level. Our Morningstar Investor Return studies found that highly volatile funds are much harder for investors to hold, and investor returns tend to trail total returns. Morningstar Analyst Rating of Bronze or higher. Here, we get a little qualitative, as this fundamental, forward-looking rating factors in qualitative and quantitative measures.

American Funds New World Merdian Growth Weitz Value

Morningstar Research 8 Who Fell Out of the Fantastic 50?

The Contrarian

10

T. Rowe’s Challenge

Red Flags 11 New Managers With Something to Prove

Market Overview

12

Leaders & Laggards

13

Manager Changes and News

14

Portfolio Matters

16

A Bucket Portfolio for Fidelity Investors

Tracking Morningstar

18

Analyst Ratings

Income Strategist

20

TCW/MetWest Prospers From PIMCO’s Outflows

Changes to the 500

22

FundInvestor 500 Spotlight

23

Follow Russ on Twitter @RussKinnel

Continued on Page 2