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Vanguard and Montag Funds Join the 500 Changes to the 500 | Russel Kinnel

half corporates, plus government bonds and Trea- suries. Run by Ron Canakaris and Helen Donahue, the fund is appealing if you want exposure to growth stocks but fear the volatility of a pure equity fund. A Mostly Passive Emerging-Markets Fund Parametric Emerging Markets EAEMX is the third new fund to join the Morningstar 500 . It’s a passive emerging-markets fund with an emphasis on frontier markets. Frontier markets are the smaller, more vol- atile end of emerging markets. Parametric argues that they add diversification. The fund tries to handle the limited liquidity in markets like Slovenia and Columbia by keeping position sizes small. In a sense, you get a flatter version of an emerging- markets index fund. There is less in the biggest countries in emerging markets and more in the little guys. The fund is a little like some DFA funds in that it doesn’t tightly track an index, but it also eschews stock-picking. It aims to minimize trading, and it buys the largest companies in each country. The fund charges 1 . 42% , which is OK for an emerging-markets fund but kind of high for a passive fund. We rate it Bronze, and it has returns since 2006 that are pretty close to the category average. FMI Focus Now Broadview Opportunity FMI Focus has been renamed Broadview Oppor- tunity BVAOX to reflect the change in advisor. The managers haven’t changed, but the longtime subadvisor, Broadview, now controls the fund. We maintain our Silver rating on the fund. œ

Three Vanguard funds are being merged away: Vanguard Developed Markets Index VDMAX , Vanguard Tax-Managed Growth & Income VTGLX , and Vanguard Growth Equity VGEQX . All three funds are now closed to new investment. Vanguard Tax-Managed International VTMGX is going to survive, and Vanguard Developed Markets Index will merge into it. However, the fund will be renamed Vanguard Developed Markets Index and will be run like the merging Vanguard Developed Markets Index without the tax management. First, a Vanguard Fund Vanguard Managed Payout Growth & Distribu- tion VPGDX is designed to help retirees manage their withdrawal strategies. This fund, which has a Morningstar Analyst Rating of Bronze, aims to pay out 4% each year. The fund invests in a mix of bonds and stocks through a mix of Vanguard funds, most of which are passively managed. However, it isn’t as plain-vanilla as the firm’s target- date funds. The fund has a market-neutral sleeve and commodities, the former to boost income and the latter to keep pace with inflation. It carries a $ 25 , 000 minimum because it is intended to be a core fund for managing income. See facing page for more details. Aston/Montag & Caldwell Balanced Joins Aston/Montag & Caldwell Balanced MOBAX is an appealing mix of growth stocks and bonds. It takes the same growth stock strategy you know from Aston/Montag & Caldwell Growth MCGFX and adds in a high-quality bond portfolio. The bond side is That leaves us with three openings. Here’s how we’ve filled them.

What is Morningstar FundInvestor 500 ? The Morningstar FundInvestor 500 features the industry’s best and most notable funds. Use the list to get new in- vestment 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 Aston/Montag & Caldwell Balanced Vanguard Developed Mrkts Indx Parametric Emerging Markets Vanguard Growth Equity Vanguard Mngd Payout Grw& Dst Vanguard Tax-Managed Grw& Inc

Category Change

From

To

Dynamic US Growth

Large Growth Mid-Cap Grwth

Janus Growth & Income

Large Growth Large Blend

Janus Overseas

Frgn Lg Growth Frgn Lg Blend

Oakmark Equity & Income

Moderate Alloc Aggressive Alloc

Invesco Equity and Income

Moderate Alloc Aggressive Alloc