(PUB) Morningstar FundInvestor

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An Upgrade for FMI Focus and a Downgrade for FPA Paramount Changes to the 500 | Russel Kinnel

That’s a nice recovery from a bump in the road the fund hit around 2003 , when assets surged to $ 1 . 2 billion, prompting the fund to close. The fund may have waited too long, and it lagged for an extended stretch. That slump led to outflows, a reopening, and a rebound in returns. The fund is now around $ 800 million, and Lane vows to close in a timely fashion in order to avoid a repeat of 2003 . Silver Rating for Greenspring We’ve issued our first rating for Greenspring GRSPX , and it’s Silver. The fund is two parts caution and one part aggression. It owns small-value stocks and short- term high-yield bonds. It’s a formula that generally has provided admirable risk-adjusted returns. The fund’s 15 -year returns of 7 . 4% annualized place it in the top decile of moderate allocation. In 2008 , its 11 . 7% loss was in the top 2% of the category. It lagged in the 2009 rally, but that’s still a welcome trade-off. Manager Charles Carlson has been running the fund since 1987 . See the facing page for more details. We rated Vanguard FTSE Social Index VFTSX Bronze for its low costs and its improved benchmark. We started Vanguard Growth & Income VQNPX at Neutral because we don’t see the case for it versus Vanguard 500 Index VFINX . œ

We are adding Becker Value Equity BVEFX to the Morningstar 500 . The 4 -star large-value fund has outlegged the average large-value fund and the S & P 500 since it was launched in November 2003 . Man- agement’s emphasis on quality value has enabled the fund to hold up well in downturns while still pro- ducing respectable returns in rallies. The fund has a small asset base but charges a modest 0 . 93% ex- pense ratio. It’s run by Patrick Becker Jr., Stephen Laveson, Micheal McGarr, Robert Schaeffer, and Mar- ian Kessler. The first four have been listed as managers since inception, while Kessler became comanager in 2005 . To make room, we’re taking out Brandywine BRWIX . As noted earlier in the issue, this Neutral-rated fund continues to disappoint, and it has seen a huge exodus of shareholders. Ratings Changes We lowered the rating of FPA Paramount FPRAX following a shift in strategy and management. The fund is moving from a global growth strategy to a global value strategy. In addition, its two longtime lead managers, Eric Ende and Steve Geist, will step down. Recent additions Greg Herr and Pierre Py will take the helm. Given Herr and Py’s limited record, we have lowered our rating to Neutral from Silver. In addition, it’s worth noting that FPA has warned the change may result in a sizable capital gains payout as the new lead managers overhaul the portfolio. Meantime, we have raised our rating on FMI Focus FMIOX . We’ve warmed up to this Milwaukee-based fund and its disciplined approach. Manager Rick Lane recently hit his 15 -year mark at the fund and the current 15 -year return is a sparkling 13 . 5% annualized.

What is Morningstar FundInvestor 500 ? The Morningstar FundInvestor 500 features the industry’s best and most notable funds. Use the list to get new investment 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

Becker Value Equity BVEFX

Brandywine BRWIX

Rating Change

To

From

FPA Paramount FPRAX

None

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FMI Focus FMIOX

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New Ratings Vanguard FTSE Social Idx Inv VFTSX ´ Greenspring GRSPX • Vanguard Growth & Inc Inv VQNPX ‰