(PUB) Morningstar FundInvestor

October 2013

Morningstar FundInvestor

15

the investor returns are 9 . 2% versus 7 . 7% for total returns. That’s pretty impressive.

The change will help Danoff, who also runs the $ 97 billion, Silver-rated Fidelity Contrafund FCNTX . In the past, Advisor New Insights and Contrafund were run in a nearly identical fashion. With the addition of Roth, Advisor New Insights likely will include more mid-cap stocks in the future, which Roth incorpo- rates at his other charges to a greater extent than Danoff, who’s had less flexibility given the size of his asset base. Brandywine Shareholders Approve Reorg Shareholders of Brandywine funds voted to approve Friess Associates’ deal to buy back the firm from AMG . A long-running slump and massive outflows prompted the move. Friess Associates is now employee-owned. Vanguard Plans Low-Volatility Fund Vanguard said it will launch a global low volatility fund in the fourth quarter. The fund will be half U.S. and half foreign equities. It will hedge away currency risk in order to reduce volatility. Vanguard did not say what other tactics it will use to reduce volatility. Some exchange-traded funds have been launched to invest in stocks with low beta, but we don’t know if that’s part of the plan at Vanguard. Although the fund is officially listed as actively managed, it sounds like a close cousin to Vanguard’s Tax-Managed Funds. Those funds are passively managed but officially count as actively managed because they will deviate from their benchmarks in order to minimize taxes. The fund will charge 0 . 30% for Investor shares and 0 . 20% for Admiral Shares. Investor shares have a $ 3 , 000 minimum investment while Admiral requires a $ 50 , 000 minimum. œ Vanguard’s Equity Investment Group will manage the fund.

I started to think about how many socially responsible investors seem to care as much about the social screens a fund runs as they do about its performance. Is it possible this makes for a more patient investor? We’ve tested total return of SRI funds, and they almost always come up close to average. This means that SRI screens don’t add or subtract much value. Some proponents have said they do add value, while SRI ’s harshest detractors have said the screens really hurt performance. The evidence says it’s a wash. But does SRI investors’ patience give them better investor returns than the rest of the world? Well, no. It turns out the TIAA - CREF fund was the exception. The average percentile rank for five-year investor returns is 45% and for 10 years it is 52% . So, once more, SRI returns are right in the middle. Most likely, the TIAA - CREF fund benefited from being held mostly in 401 (k)s where steady investments make for some of the best investor returns we see. In fact, it had steady inflows each quarter starting in the first quarter 2007 up until the third quarter 2011 , when it was down to just $ 1 million in inflows. So, the timing wasn’t perfect, but steady inflows are good enough because it means investors captured the rebound well. But for every TIAA - CREF Social Choice Equity, there’s a Calvert Income CFICX , where five- and 10 -year returns are bottom quintile. I suppose one could argue that some people buy SRI funds just for their performance and are inclined to jump out when performance goes south. If that’s the case, then maybe the truly dedicated SRI investors do a better job, but there’s no way to extract that from the data. Danoff and Roth to Comanage Fund John Roth of Fidelity New Millennium FMILX and Fidelity Mid-Cap Stock FMCSX will be added as a comanager of the $ 23 billion, Silver-rated Fidelity Advisor New Insights FNIAX alongside Will Danoff.