(PUB) Investing 2015
June 2015
Morningstar FundInvestor
9
list. Morningstar has maintained a Bronze rating on the fund, demonstrating confidence that Linehan is well-equipped to manage the transition. T. Rowe Price International Stock PRITX This foreign large-growth fund also got a new manager recently, but Richard Clattenburg, taking over for Bob Smith after nine years on the fund, is less experienced. Clattenburg has been a named comanager on the fund since 2010 and can lean on Smith throughout 2015 . This offering still has its strong points, including reasonable fees and an experienced team of analysts and portfolio managers. But Morningstar has lowered the fund’s Analyst Rating to Neutral to reflect a lower level of conviction in Clattenburg’s ability to run the show successfully. Performance Has Dipped The returns test for the Fantastic funds is a strict one. The offerings need to beat their prospectus benchmark over the lead manager’s tenure, a test that’s typically tougher than clearing a category average. American Funds American Mutual AMRMX This large-value fund’s sturdy portfolio fell behind the benchmark in 2014 by 0 . 84 percentage points, which is a relatively small shortfall and still strong enough to finish in the category’s top decile. Even so, the benchmark shortfall put the fund a hair behind the Russell 1000 Value Index for the period beginning in January 2006 , the start date for the fund’s longest-serving managers. Fundholders have good reason to stick around, however. The fund still receives a Gold rating for its proven, dividend-focused approach, reasonable fee, and tested management team. The strategy has lagged in some more-speculative rallies and holds up best during market declines, such as 2008 . This one is a keeper. FPA Capital FPPTX Longest-serving manager Dennis Bryan put up strong relative returns at this mid-value fund in the four years after he joined the management team in November
2007 , but this fund fell behind in 2012 and has had trouble picking itself back up. It trailed the Russell Mid Cap Value Index by double digits in 2013 and 2014 , erasing the fund’s impressive gains coming out of the financial crisis. This fund is no stranger to periods of underperformance, but the current management team hasn’t endured a similar period. As such, Morningstar downgraded the fund in May 2015 to Bronze from Silver, a sign of waning conviction. Patient investors are likely to fare well here over the long term but don’t expect a smooth ride. Mairs & Power Balanced MAPOX This moderate-allocation offering was subject to a new performance test for the 2015 Fantastic list. Previously we considered longtime manager Bill Frels’ record, but when he retired at the end of 2014 , performance rested with comanager Ron Kaliebe, who has been assigned to the fund since 2006 . Performance over Kaliebe’s tenure has been strong overall, but the fund did trail the benchmark in five of the nine calendar years. Morningstar has maintained a Silver rating on this fund through the management change, indicating conviction in Kaliebe’s ability to maintain the fund’s prudent approach. The investment process stresses sustainable competitive advantages and above-average earnings growth. Vanguard Wellington VWELX One of our favorite funds, Gold-rated Vanguard Wellington, fell out of the Fantastic 50 . The reason is that its returns since the end of 2002 now lag the S & P 500 . Yes, an allocation fund with a pure equity benchmark has a very high bar to overcome, but those are the rules I set out. Wellington’s past 12 months saw the fund produce returns that were about half of those of the S & P 500 . That was pretty good for its peer group but not enough to keep it ahead from the beginning of Ed Bousa’s tenure. So, it is out of the Fantastic 50 but still a keeper. K Contact Laura Lutton at Laura.lutton@morningstar.com
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