(PUB) Investing 2016

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2 Bronze-Rated Stock Funds Join the Morningstar 500 Changes to the 500 | Russel Kinnel

sure to some important less-liquid strategies. In addi- tion, performance has been declining.

I’m also dropping AMG River Road Select Value because it’s a small fund that’s getting smaller. Over the past 12 months, the fund has had more than $60 million in outflows and is down to a total of $40 million. The drop in assets has led fees to bounce to 1 . 50% today from 1 . 43% a few years ago. The fund has a 3 -star Morningstar Rating, so it’s not like returns have been a disaster. But the flow trend makes me wonder how much longer the fund will be around. K

I am adding Harbor Small Cap Value HASCX and Clear- Bridge Mid Cap SBMAX to the Morningstar 500 . Both funds have Morningstar Analyst Ratings of Bronze. Harbor Small Cap Value is a strong-performing fund run by Atlanta-based Earnest Partners. Manager and firm founder Paul Viera runs a proprietary model that examines success characteristics of various industry sectors to find what figures will point to win- ning names. Then market and macroeconomic conditions are factored in and finally fundamental analysis winnows the field to a portfolio of about 60 stocks. The fund charges 0 . 85% for “institutional” shares that have a $50 , 000 minimum and 1 . 22% for investor shares with a $2 , 500 minimum. See the facing page for more details. ClearBridge Mid Cap is a mid-blend fund that is available in No Transaction Fee supermarkets without a load. The fund has been run by Brian Angerame and Derek Deutsch since May 2005 . The fund is nearly a pure play on mid-caps as it doesn’t have much outside its market-cap band. Management looks for stocks trading at a discount to the Russell Midcap Index but with superior returns on equity and cash flow yield. Performance at the $2 billion fund has topped the mid-blend peer group but slightly lagged the bench- mark. The fund charges an expense ratio of 1 . 20% . To make room, I am dropping Neutral-rated Natixis ASG Global Alternatives GAFAX and unrated AMG River Road Select Value ARSMX . Natixis ASG Global Alternatives has fallen in our opinion, and we lowered it to Neutral from Bronze in August. We think the fund’s methodology for repli- cating hedge fund returns by running regressions on hedge fund factors is too indirect and lacks expo-

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

ClearBridge Mid Cap

AMG River Road Select Value

Harbor Small Cap Value

Natixis ASG Global Alternatives

Rating Change (Downgrades)

Ticker

From

To

Invesco Equity and Income

ACEIX

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Invesco Growth and Income

ACGIX

Rating Change (Under Review)

From

To

Fidelity Leveraged Company Stock FLVCX

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New Ratings

To

American Beacon Intl Equity

AAIPX

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Fidelity Independence

FDFFX

‰

Fidelity Mortgage Securities

FMSFX

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Harbor Small Cap Value

HASCX

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Lateef

LIMAX

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Royce Total Return

RYTRX

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T. Rowe Price Growth & Income PRGIX

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