(PUB) Morningstar FundInvestor

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Morningstar FundInvestor

August 2 013

Third Avenue Real Estate Tops Its Peers Leaders & Laggards | Kailin Liu

Laggards Longleaf Partners LLPFX

This large-blend fund delivered a 15 . 61% return for the year to date, placing it behind 87% of its category peers. Managers Mason Hawkins and Staley Cates are deep-value managers and not shy about holding a very concentrated portfolio, deviating from bench- mark weightings, and holding on to picks even as they get pummeled in the short term. Since the begin- ning of 2013 the fund suffered for its overweightings to basic materials and communications and its under- weightings in health care and industrials. Its cash stake was also higher than 10% , which kept the fund from participating fully in the market’s rise. This foreign small-cap index fund returned 5 . 23% since the beginning of 2013 , trailing 86% of the foreign small/mid-blend category. This fund tracks the Vanguard FTSE Global Small Cap ex- US Index, which (among other differences from the typical fund) has a substantially larger weighting to Canadian stocks and a lower weighting to eurozone stocks than the typical foreign small/mid-blend fund does, which hurt performance as Canadian stocks under- performed and eurozone stocks outperformed this past year. Janus Twenty JAVLX This large-growth fund gained 14 . 41% since the be- ginning of 2013 , worse than 86% of its category peers. Ron Sachs managed the fund from January 2008 through mid-May 2013 , after which Marc Pinto replaced him as manager. Sachs ran a concen- trated portfolio of 35 to 40 stocks, which he se- lected based on his estimates of long-term revenue growth potential. Pinto has also suggested that he will keep the fund concentrated but will not stash as many assets in the top names. Since the beginning of the year several stock picks, particularly in the industrials and technology sectors, have not worked out. In particular, Apple AAPL and Japanese in- dustrials company Fanuc held almost 15% of the port- folio between them and had double-digit losses. œ Contact Kailin Liu at kailin.liu@morningstar.com Vanguard FTSE All-World Ex-U.S. Small Cap Index VFSVX

Leaders Third Avenue Real Estate Value TAREX This global real estate fund gained 9 . 07% for the year to date, landing at the top of its category for the period. Managers Michael Winer and Jason Wolf follow a deep value strategy and prefer real estate operating companies over REIT s. They run a concen- trated portfolio of 30 - 40 holdings and will build up cash when valuations aren’t appealing. Big winners outside of REIT s, such as Lowe’s LOW and Forest City Enterprises FCE .A, posted double-digit gains. DoubleLine Total Return Bond DBLTX This mortgage-focused fund lost 0 . 56% since the beginning of 2013 , better than 94% of other interme- diate-term bond funds. Manager Jeffrey Gundlach, in contrast to other intermediate-term bond managers, invests almost exclusively in mortgages, split be- tween riskier nonagency mortgages and high-quality government and prime mortgages. The fund’s non- agency mortgage stake performed well in the first quarter of 2013 . Also, the portfolio’s duration is also significantly shorter than the category average, which meant that the fund held up better than most of its peers when rates rose. Fidelity Large Cap Stock FLCSX This large-blend fund gained a whopping 23 . 81% for the year to date, better than 93% of its category peers. Manager Matthew Fruhan keeps the portfolio roughly split between steady-growing stocks and more economically sensitive companies and buys when prices are below his expectations based on earnings growth. Since the beginning of this year the fund’s overweighting in financial-services stocks helped as that sector outperformed, and good stock picks in financial-services and technology stocks boosted performance even more. Top holdings like J.P. Morgan Chase JPM , Wells Fargo WFC , and Google GOOG posted double-digit returns.

Ten Best-Performing Funds

Fund Name

YTD Cat Rank %

Ten Worst-Performing Funds 99 Hussman Strategic Total R 99 Royce Low Priced Stock Sv 99 Amana Growth 98 First Eagle US Value A 98 Janus Overseas T 98 PIMCO Inflation Response 98 Permanent Portfolio 98 Appleseed 97 Royce Premier Invmt 97 Artisan International Val ClearBridge Aggressive Gr 1 Fairholme Focused Income 1 Invesco Equity and Income 1 Oakmark International I 1 PIMCO Fundamental Advtg A 1 PRIMECAP Odyssey Growth 1 T. Rowe Price Media & Tel 1 Third Avenue Real Estate 1 Vanguard Precious Metals 1 1 Fund Name FPA Capital YTD Cat Rank %