(PUB) Morningstar FundInvestor

September 2013

Morningstar FundInvestor

13

Sound Shore and Greenspring Faring Well in 2013 Leaders & Laggards | Kailin Liu

or bottom-decile of its category for five straight years. Its 10 -year returns are just a hair above the category average. Laggards Janus Overseas JAOSX This foreign large-growth fund is near the bottom of its peer group with a 4 . 5% loss so far in 2013 . Manager Brent Lynn’s growth strategy is distinctive. He is not afraid to add to positions when the stock is battered because of short-term issues. Lynn also tends to hold more assets in emerging markets and smaller-cap names than the typical foreign large- growth peer, and he is not afraid of sector concen- tration. The strategy has hurt the fund for the year to date. The fund’s overweighting to energy and real estate, as well as to emerging-markets stock in Asia and Latin America, hurt performance. Royce Special Equity RYSEX This small-cap fund posted a 12 . 7% return for the year to date, but it still lands in the bottom decile of its category. Manager Charlie Dreifus runs a classic value approach by buying stocks trading at a large dis- count to his estimates of intrinsic value and empha- sizing profitability, conservative balance sheets, and strong free cash flow metrics. Since the begin- ning of 2013 , the fund has lagged largely because of con-sumer stock and technology picks that have declined or lagged in the period. PIMCO Low Duration PLDDX PIMCO ’s short-term bond fund lost 1 . 6% for the year to date, worse than 87% of its category. Manager Bill Gross uses PIMCO ’s macroeconomic forecasting and sector specialist desk to make investment deci- sions, and he has not been afraid to move the port- folio around to reflect these views. In particular, the firm’s macro views led Gross to hold more than the typical peer in Treasury Inflation-Protected Securities and emerging-markets debt, both of which suffered greatly in the bond-market sell-off this past May. œ Contact Kailin Liu at kailin.liu@morningstar.com

Leaders Sound Shore SSHFX

Ten Best-Performing Funds

Fund Name

YTD Cat Rank %

This large-value fund gained 22 . 8% for the year to date, better than more than 95% of its peer group. The management team looks for mid- and large-cap stocks trading at a substantial discount that also have strong fundamentals and solid competitive posi- tions within their industries. They tend to keep the portfolio fairly concentrated with around 40 stocks, though no single company will typically get more than 3 . 5% of assets. Since the beginning of 2013 the portfolio has had several winners with double-digit returns, including top holdings Texas Instruments TXN , Novartis NVS , and State Street STT . The overweighting in health-care stocks also helped as that sector outperformed. Greenspring GRSPX This fund looks very different from its moderate-allo- cation peer group, and its category-beating 12 . 3% return for the year to date speaks to an appealing pro- cess. While most moderate-allocation funds invest in large-cap blend or growth stocks, manager Chip Charlson tends to focus on small- and mid-cap stocks. On the fixed-income side, the fund buys short-term high-yield bonds, in contrast to the typical peer’s slug of intermediate-term investment-grade bonds. This unusual profile has paid off for the year to date, as smaller-cap stocks and high-yield bonds have beaten out large caps and higher-quality issue in that period. William Blair Small Cap Growth WBSNX This fund is up a whopping 32 . 3% for the year to date thanks to an eclectic group of fast-growing compa- nies. WNS Holdings WNS , CoStar CSGP , Pandora Media P, and Tangoe TNGO have been big winners for the fund. Even within the small-growth group, the fund favors faster-growing, higher-priced stocks. That aggressive positioning means the fund is often near the top or bottom. Including this year, it has been top-

Ten Worst-Performing Funds Amana Growth 99 Royce Low Priced Stock Sv 99 First Eagle US Value A 98 Hussman Strategic Total R 98 Janus Overseas T 98 PIMCO Inflation Response 98 FPA Capital 97 Royce Premier Invmt 97 Royce Value Svc 97 Schneider Small Cap Value 97 Artisan International Val Dodge & Cox Balanced 1 Fairholme Focused Income 1 Fidelity Municipal Income 1 Longleaf Partners Interna 1 Oakmark International I 1 T. Rowe Price Media & Tel 1 Third Avenue Real Estate 1 Vanguard Capital Opportun 1 Vanguard Capital Value In 1 1 Fund Name YTD Cat Rank %