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Morningstar FundInvestor
April
2015
Leaders
T. Rowe Price Value
TRVLX
T. Rowe Price Value’s
10
.
4%
return over the past year
surpassed its typical large-value rival’s by nearly
2
.
5
percentage points. While lead manager Mark Finn
normally seeks out firms embroiled in controversy,
he prefers to tread carefully in highly cyclical sectors
such as energy. The fund’s below-average energy
stake contributed to peer-beating results, and an over-
weighting to the health-care sector also helped. Since
Finn took the reins in December
2009
, the fund has
earned strong results, gaining
15
.
5%
and outper-
forming the category norm and the Russell
1000
Value
Index by
290
and
100
basis points, respectively.
Vanguard Wellesley Income
VWINX
This fund has benefited from falling interest rates. Its
duration recently stood at
6
.
2
years, more than two
years longer than the typical conservative-allocation
peer’s. That positioning owes to the fact that fixed-
income manager John Keogh tethers duration to the
Barclays
U.S.
Credit A or Better Bond Index’s. The
10
-year Treasury yield fell more than
40
basis points
over the past year through March
2015
, helping the
fund earn a
6
.
6%
gain that ranked in the conservative-
allocation Morningstar Category’s best decile. A
modestly above-average equity stake (
37
.
3%
versus
34
.
8%
for the typical rival) also acted as a tailwind.
MainStay ICAP International
ICEUX
This fund lost
0
.
5%
over the last year, while its typical
peer retreated
3
.
3%
. Significant overweighting to
Japan, which takes
21%
of assets compared with
15%
for the average competitor, boosted results as
aggressive monetary stimulus from the Bank of Japan
lifted equities. Strong stock selection in the financials
and health-care sectors helped. It essentially avoids
companies domiciled in emerging markets, so it bene-
fited from not having exposure to Brazil or Russia.
Laggards
Vanguard Capital Value
VCVLX
This fund’s
4
.
8%
one-year return through March
2015
landed in the large-blend category’s bottom decile.
It especially struggled over the seven-month period
ended January
2015
, when an overweighting in
energy weighed on results. (Its energy position stood
at
16
.
4%
of assets in June
2014
versus about
10%
for large-blend peers and the Russell
3000
Index.)
Managers Peter Higgins and David Palmer, who main-
tain their own portfolio sleeves, are both aggressive
contrarian investors who are willing to buy companies
facing operational or financial challenges. Both
managers still believe in energy exploration and
production companies in particular.
Franklin Income
FKINX
Franklin Income’s aggressive style often makes it
stand out in the conservative-allocation category.
Because of its income focus, the fund takes on more
equity and credit risk than most peers. Its
47%
stock
stake clocks in roughly
10
points higher than its
average rival’s, and junk bonds take the lion’s share of
its
42%
fixed-income sleeve. Taking advantage of
depressed valuations in high-yield energy bonds,
management built the fund’s energy exposure up to
18%
of assets (
10%
energy stocks and
8%
fixed
income). That positioning weighed on results in late
2014
as oil prices dropped, placing the fund in its peer
group’s
88
th percentile over the past year.
Lazard Emerging Markets Equity
LZOEX
Lazard Emerging Markets Equity retreated
5
.
9%
over
the past year, while its typical peer lost only
1
.
2%
. An
overweighting in Russia largely explains the fund’s
weak results.
Sberbank
SBER
and
Gazprom
OGZD
were each top-
10
holdings as of June
2014
. Both
stocks were slammed in the second half of the year,
as were the fund’s other Russian holdings, with the
rouble’s plunge adding to the pain. Portfolio manager
James Donald bought more of both companies; he
says that even with their substantial risks, their domi-
nant market positions and deeply discounted prices
make them appealing long-term holdings. Donald has
succeeded over the long haul by investing where
doubts are rampant, but his approach can lead to
short-term bumps.
œ
Ten Worst-Performing Funds
Fund Name
YTD Cat Rank %
FPA Capital
100
AMG Yacktman Service
99
GoodHaven
99
Janus Overseas T
99
Loomis Sayles Investment
99
AMG Yacktman Focused Serv 98
Delafield Fund
98
Dodge & Cox Balanced
98
Greenspring
98
Janus Twenty T
98
Ten Best-Performing Funds
Fund Name
YTD Cat Rank %
Century Small Cap Select
1
Fairholme Focused Income 1
Fidelity Capital & Income
1
JOHCM International Selec 1
Oakmark International Sma 1
Vanguard Capital Value In 1
Franklin Mutual Beacon A 2
Sequoia
2
Vanguard Interm-Term Bond 2
Fidelity Independence
3
T. Rowe Price Value Ahead of the Pack
Leaders & Laggards
|
Leo Acheson