(PUB) Investing 2015

13

December 2015

Morningstar FundInvestor

Brown Capital Enjoying a Strong Year Leaders & Laggards | Robert Goldsborough

Laggards GoodHaven GOODX This fund has had another rough year, as its managers’ penchant for despised or ignored stocks has led them to contrarian picks that haven’t worked out. Morningstar recently downgraded GoodHaven’s Analyst Rating to Neutral from Bronze. The fund is on track for its third-consecutive bottom-decile calendar- year return. In 2015 , GoodHaven has lagged 98% of its large-value competitors. The fund has been hurt by holdings in the battered commodity space, including WPX Energy WPX , Barrick Gold ABX , and Birchcliff Energy , all of which are down 25% or more in 2015 . Also, top holding Walter Investment Management WAC has struggled to return to profit- ability and is down 12% for the year. Royce Special Equity Multi-Cap RSEMX This Bronze-rated fund has struggled relative to its large-blend peers this year. The fund has lost 8 . 3% and is underperforming 99% of its category. Manager Charlie Dreifus has a preference for profitable, conservatively managed businesses. However, this concentrated fund also focuses on absolute valua- tions. That has tended to steer Dreifus and his team to the consumer cyclical space, which has been a major detractor this year. Performance has been dragged down by retail holdings such as Gap GPS , Nordstrom JWN , and Bed Bath & Beyond BBBY and by media firms such as Viacom VIAB and Scripps Networks SNI . This fund has been held back in 2015 by a sizable emerging-markets weighting. The fund's 6 . 5% loss has trailed 93% of foreign large-blend peers this year. Greece’s Eurobank Ergasias EGFEF shed 93% of its value from the time that this fund’s managers bought it in 2014 ’s third quarter until they gradually sold it over the next year. Others emerging-markets picks also have been weak, including casino operators MGM China Holdings and Wynn Macau , Indian bank ICICI Bank ICICIBANK , Spanish bank Banco Santander SAN , and Greek bank Piraeus BPIRY . K Contact Robert at robert.goldsborough@morningstar.com American Funds International Growth and Income IGAAX

Leaders Brown Capital Management Small Company BCSIX This fund has weathered the departure earlier this year of longtime comanager Amy Zhang. Its 12 . 1% year-to-date return bests 98% of its small-growth Morningstar Category peers. The fund has a Morning- star Analyst Rating of Gold. Its managers have a philosophy of letting winners run, and that strategy has paid off well this year, as longtime holding Incyte INCY has returned 56% . Several other holdings in this concentrated fund—many of them software firms—have outperformed nicely, such as Manhattan Associates MANH , Cantel Medical CMN , Tyler Technologies TYL , Ellie Mae ELLI , and Blackbaud BLKB . Those successes have more than offset pain from laggards like Dynamic Materials BOOM , Geopace Technologies GEOS , and Quidel QDEL . Cohen & Steers Realty Shares CSRSX A focus on several key real estate subsectors has helped this Bronze-rated fund to shine this year, topping 92% of its domestic real estate peers. Lead manager Thomas Bohjalian and his team long have had a preference for the self-storage sector. Public Storage PSA and CubeSmart CUBE both have returned more than 30% this year. Data-center opera- tors Equinix EQIX and QTS Realty Trust QTS also have done well. The managers’ decision to keep their posi- tion in their largest holding, Simon Property Group SPG , above that of their benchmark has paid off as well. Vanguard Global Minimum Volatility VMVFX This passively managed fund has outpaced 95% of its world-stock peers in 2015 , returning 7 . 5% . It has bested its category this year for a variety of reasons, including an underweighting in energy and materials stocks. Currency hedging has contributed to strong performance, and another benefit has come from an outsize position in pharmaceutical firm Galenica GNHAF , which has returned 88% this year.

Ten Best-Performing Funds

Fund Name

YTD Cat Rank %

Clipper

1 1 1 1 1 1

DoubleLine Total Return B Fairholme Focused Income

Fidelity Overseas

T. Rowe Price Capital App T. Rowe Price Global Tech T. Rowe Price Media & Tel 1 Vanguard Interm-Term Invm 1 Vanguard Tax-Managed Bala 1 ASTON/Montag & Caldwell B 2

Ten Worst-Performing Funds

Fund Name

YTD Cat Rank %

Sequoia

100

Longleaf Partners 99 RiverPark/Wedgewood Retai 99 Royce Special Equity Mult 99 GoodHaven 98 JOHCM International Selec 98 Loomis Sayles Investment 98 ASTON/TAMRO Small Cap N 96 ClearBridge Aggressive Gr 96 Janus Contrarian T 96