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New Ratings for Funds Young and Old Tracking Morningstar Analyst Ratings | Russel Kinnel

example, everyone picks economically sensitive stocks or raises cash. The firm also implemented risk controls to further get a grip on things. You’d think these gaps would have been apparent from the begin- ning. Anyway, if these changes make the fund less erratic, that could be a good thing. Vanguard FTSE All-World ex-US Small-Cap VFSVX is rated Silver, though it’s a newcomer with just three years under its belt. Your choice for for- eign small-cap passive funds really comes down to this one versus the aforementioned DFA fund. This fund charges 0 . 45% , which is 11 basis points less than the DFA fund. Vanguard has chosen a good low- turnover index to follow, and we see big things here. However, my preference leans slightly toward DFA because it has beaten Vanguard’s index over the long haul. Annoyingly, this fund doesn’t have a cheaper Admiral share class yet, but it does have an exchange-traded fund ( VSS ) that charges 0 . 25% . Vanguard Strategic Equity VSEQX merits a Neutral rating because our enthusiasm for Vanguard’s quan- titative group is rather tepid. The fund uses quantita- tive models that emphasize high profitability and low valuations. Like many quant funds, it lagged in 2008 and 2009 when macro events dominated the kind of past individual stock data that this fund uses. However, it has rebounded nicely in the past two and a half years. However, its longer-term record is not impressive, and Vanguard’s quant group has been closer to adequate than stellar at other funds. œ

Although we spend most of our time updating ratings of funds we’ve already rated, we continue to add funds to our ratings universe. Some of these funds are relatively new, while others have been around for a long time. We don’t have any rules regarding at what level a fund must start; we just rate them where we think they fit. Here are five recent ratings. Fidelity Real Estate Investment FRESX earns a Morningstar Analyst Rating of Bronze from us. It’s a nice straightforward play on real estate investment trusts. Its 55 -stock portfolio makes it one of the more diffuse funds in the category as there just aren’t that many REIT s out there. So, you can find some bolder, more-concentrated funds than this one. However, Steve Buller has done a fine job executing this modest strategy. The fund has beaten most of its peers and is even a hair ahead of Vanguard REIT Index ’s VGSIX retail shares since their 1996 incep- tion (which slightly predates Buller’s 15 -year tenure.) The fund has outperformed the category average by a range of 42 – 277 basis points in each calendar year since 2007 , when it last underperformed. DFA International Small Company DFISX is rated Silver because it is right in DFA ’s wheelhouse. This fund delivers excellent small-cap passive exposure by tracking a savvy approach to trading less-liquid names. This enables the fund to perform better than most small-cap benchmarks both in the United States and abroad, even though they aren’t taking a view on individual stocks. The fund charges 0 . 56% , making it one of the cheapest funds in the category. RS Value RSVAX earns a Neutral rating because it is in the process of overhauling its strategy. Its portfo- lio is the result of industry specialists selecting stocks in their area, and RS has realized it needs overall portfolio oversight to avoid unintended bets if, for

What Are Morningstar Analyst Ratings?

Our ratings are chosen for long- term success. Analysts assess a fund’s competitive advantages by analyzing people, process, parent, performance, and price. They do rigorous analysis and then submit their ratings to a committee that vets their work for thoroughness and consistency.