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Hotchkis & Wiley High Yield Joins M500
I’m adding
Hotchkis & Wiley High Yield
HWHAX
to the Morningstar
500
. The fund, with a Morningstar
Analyst Rating of Bronze, is run by former
PIMCO
veterans Ray Kennedy and Mark Hudoff. The fund has
outperformed its peers since its
2009
launch, yet it
has a modest
$2
.
5
billion asset base. Both managers
invest more than
$1
million in the fund. The fund is
available in many No Transaction Fee fund supermar-
kets. See the facing page for more details.
Fidelity Municipal Income 2015 Goes Out
To make room, I am taking out
Fidelity Municipal
Income 2015
FMLCX
, which is set to liquidate
on schedule in June
2015
. Designed to have a bond-
like maturity yet offer the diversification and
professional management of a mutual fund, the fund
didn’t really catch on with investors, though it is
a clever idea.
Global Bond Fund Downgraded
We lowered our Analyst Rating on
American Funds
Capital World Bond
CWBFX
to Neutral from Bronze.
About one third of the fund’s assets are now in the
hands of new managers.
The fund’s new principal investment officer, Thomas
Hogh, won’t be making big changes to its approach.
He worked on this fund alongside predecessor Mark
Dalzell for nearly
20
years and has generated very
similar results at a near-clone since October
2006
.
Manager Mark Brett has rejoined the fund following
a stint from January
1998
through March
2001
and
hasn’t made wholesale changes to Dalzell’s sleeve
of the portfolio. Brett serves as lead manager at
American Funds Intermediate Bond Fund of
America
AIBAX
and heads up the portfolio strategy
group that shapes portfolio positioning across
all of American Funds’ bond funds. That role and his
long-standing involvement with this strategy lessen
the chance of disruptions to the fund.
Even so, it will take some time to see how a few
moving parts come together. David Daigle took the
reins on the fund’s high-yield stake (
9
.
5%
of assets
as of Dec.
31
,
2014
) in late
2014
and will likely employ
a more opportunistic style than predecessor Mark
Linden. Brett will likely take a more concentrated
approach to corporate debt than Dalzell. Lastly,
the portfolio’s analyst-run sleeve is growing closer to
15%
of assets from
12
.
5%
. Each of those changes
appears incremental, but it bears watching how they’ll
affect the fund’s risk/reward profile in aggregate.
Manning & Napier Funds Reconsidered
In light of the structural changes going on at Manning
&
Napier, we are
in
the process of
reviewing our
ratings on all of the firm’s funds. Just before we
published this issue, we lowered our ratings on
Manning & Napier Equity
EXEYX
and
Manning &
Napier World Opportunities
EXWAX
to Bronze
from Gold.
The firm has reorganized its fund management
teams, and two senior investment professionals have
left the firm. The firm moved to smaller management
teams in an attempt to avoid groupthink, and it also
promoted Ebrahim Busheri to director of investments.
In the long run, the changes may prove positive, but
with so much in flux at the moment, the lower rating
is more appropriate for Manning
&
Napier Equity
and Manning
&
Napier World Opportunities. We will
complete the rerating process in April.
œ
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.
Hotchkis In, Fidelity Out
Changes to the 500
|
Russel Kinnel
Summary of Changes
Add
Drop
Hotchkis & Wiley High Yield
Fidelity Municipal Income 2015
Rating Change
To
From
American Funds Capital World Bd
‰ ´
Eventide Gilead
‰
—
Manning & Napier Equity
´ Œ
Manning & Napier PB Cnsrv
ˆ Œ
Manning & Napier PB Extnd
ˆ Œ
Manning & Napier PB Mod
ˆ Œ
Manning & Napier World Opp
´ Œ