(PUB) Morningstar FundInvestor

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Vanguard Total International Bond Joins the M500 Changes to the 500 | Russel Kinnel

Some of the top returns you’ll see belong to funds like Oakmark Select OAKLX , FPA Crescent FPACX , and AMG Yacktman YACKX . But maybe more note- worthy are those where the five- or 10 -year returns are less impressive. Provided that the manager was there the whole 15 years, you can take heart that the fund may be a decent bet for a rebound. Bridge- way Ultra-Small Company Market BRSIX is one of the more dramatic entries with bottom-quartile 10 -year returns but top-quartile 15 -year returns. It’s a micro-cap fund that naturally reflects when micro-caps are in or out of favor. American Century Equity Income TWEIX has a middling 10 -year record but strong 15 -year returns. That’s really a reflection of its cautious positioning. If you include the earlier bear market, the fund’s charms are now more apparent. Royce Low-Priced Stock RYLPX is another fund with brilliant 15 -year returns and lousy 10 -year figures. On the flip side, there are some funds with lousy 15 -year returns that you might find surprising. The closed Loomis Sayles Small Cap Growth LCGRX has top-decile 10 -year returns but bottom- decile 15 -year figures. However, managers Mark Burns and John Slavik are only on the hook for the 10 -year returns as they started in April 2005 . Janus Enterprise JAENX likewise has bad 15 - year results and solid 10 -year results. However, Brian Demain has been at the helm as lead manager only since 2007 and as assistant manager since 2004 . So I wouldn’t be discouraged by the dismal 15 -year return. œ

We’re swapping bond funds in the Morningstar 500 . Vanguard Total International Bond Index VTIBX goes in and American Funds American High Income AHITX goes out. At 13 months old, Vanguard Total International Bond Index is a fairly new fund, but it’s already up to $24 . 3 billion. With an expense ratio of just 0 . 23% for Investor shares and 0 . 20% for Admiral, this is a very cheap way to get exposure to foreign debt. The fund hedges its currency risk. By hedging away currency exposure, the fund significantly reduces volatility as currency typically accounts for a good deal of the volatility in a foreign bond fund. How- ever, the drawback is that you don’t get any foreign- currency exposure if you are looking to diversify away from the dollar. If you do want foreign-currency exposure from your foreign bond fund, consider PIMCO Foreign Bond Unhedged PFBDX . Meanwhile, to make room I’m dropping American Funds American High Income Trust. We rate this huge 2 -star fund as Neutral because we’ve been unim- pressed by its strategy and execution. Although the fund has had its moments, it lost more than its peers in 2008 and its 10 -year returns are merely middling. New Data on MFI site We have added 15 -year returns to the mfi.morningstar. com data pages. That takes you back to the 2000 – 02 bear market, so it’s pretty interesting. To find them, go to the FundInvestor 500 tab and then click on a category.

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

Vanguard Total Intl Bd Idx Inv

American Funds American Hi Inc Tr