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23
Morningstar FundInvestor
April
2015
Morningstar Analyst Rating
03-03-15
´
Morningstar Pillars
Process
Performance
People
Parent
Price
Positive
Positive
Positive
Positive
Positive
Morningstar Analyst Rating
Morningstar evaluates mutual funds based on five key pillars, which
its analysts believe lead to funds that are more likely to outperform
over the long term on a risk-adjusted basis.
Analyst Rating Spectrum
Œ „ ´ˇ ¨
Pillar Spectrum
Positive
§
Negative
¶
Neutral
NAV
12.48
12.32
12.99
12.80
11.71
12.61
11.85
. . . . .
Total Return %
2.63
0.90
8.46
17.64
1.89
18.76
. . . . . .
+/-BC Agg Bnd
2.44
-5.07
10.48
13.43
-5.95
12.22
. . . . . .
+/-BofAML HY Master
0.09
-1.60
1.04
2.05
-2.49
3.57
. . . . . .
Income Return %
1.33
5.53
5.88
7.60
7.28
8.20
. . . . . .
Capital Return %
1.30
-4.63
2.58
10.04
-5.39
10.56
. . . . . .
Total Rtn % Rank Cat
21
62
19
12
75
3
. . . . . .
Income $
0.16
0.70
0.73
0.86
0.89
0.94
0.60
. . . . .
Capital Gains $
0.00
0.10
0.13
0.05
0.25
0.44
0.53
. . . . .
Expense Ratio %
.
0.95
0.95
0.95
0.95
0.95
0.95
. . . . .
Income Ratio %
.
5.59
5.91
7.47
6.88
8.10
7.59
. . . . .
Turnover Rate %
.
51
66
57
139
175
123
. . . . .
Net Assets $mil
639
604
489
177
96
39
16
. . . . .
Performance
03-31-15
1st Qtr
2nd Qtr
3rd Qtr
4th Qtr
Total
2010
2011
2012
2013
2014
6.01 -1.01
7.85 4.93 18.76
3.41 0.92
-8.05 6.18
1.89
6.50 1.60
4.92 3.62 17.64
3.18 -0.70
2.05 3.73
8.46
2.89 2.17
-2.25 -1.81
0.90
Trailing
Total
+/- BC +/- BofAML %Rank Growth of
Return% Agg Bnd HY Master
Cat
$10,000
3 Mo
6 Mo
1 Yr
3 Yr Avg
5 Yr Avg
10 Yr Avg
15 Yr Avg
2.63 2.44
0.09
21 10,263
0.78 0.40
-0.67
59 10,078
0.65 -0.05
-1.40
60 10,065
7.45 6.88
-0.02
17 12,406
8.56 7.90
0.16
12 15,078
. . . . .
. . . . .
Tax Analysis
Tax-Adj Rtn% %Rank Cat Tax-Cost Rat %Rank Cat
3 Yr (estimated)
5 Yr (estimated)
10 Yr (estimated)
3.36
56
2.58
57
4.64
50
2.88
85
. . . .
Potential Capital Gain Exposure: -1% of assets
Rating and Risk
Time Load-Adj
Morningstar
Morningstar
Morningstar
Period Return % Rtn vs Cat
Risk vs Cat
Risk-Adj Rating
1 Yr
-3.13
3 Yr
6.09
Avg
-Avg
5 Yr
7.74
Avg
+Avg
10 Yr
. . . .
Incept
11.12
Other Measures
Standard Index
Best Fit Index
BC Agg Bnd Credit Suisse HY USD
Alpha
6.2
1.0
Beta
0.34
0.91
R-Squared
6
95
Standard Deviation
4.06
Mean
7.45
Sharpe Ratio
1.78
Morningstar’s Take
by Sarah Bush 03-03-15
Managers Ray Kennedy and Mark Hudoff take a
relatively plain-vanilla approach at Hotchkis & Wiley
High Yield. They stick to domestic high-yield bonds,
eschewing emerging-markets debt and common stock.
But, unlike some competitors in the high-yield
Morningstar Category, who run sprawling portfolios or
make big changes to sector or credit-quality based on
their macro outlook, the pair has designed this strategy
to be driven by bond-picking. This is a relatively
compact portfolio, with a significant allocation (roughly
50% of the portfolio) dedicated to smaller and mid-cap
names that, the team argues, are less widely followed
and provide particularly attractive opportunities.
The results here have so far been impressive.
Kennedy and Hudoff credit the firm’s small-cap
analysts (who also focus on stocks) with many of the
fund’s best picks and, indeed, bond-by-bond selection
has driven much of its success. After a relatively
lackluster 2009, during which the recently launched
fund struggled to put cash to work, the fund had a
particularly strong year in 2010, thanks to opportunistic
bets in the auto and industrials sectors and names
such as Interpublic Group IPG and Valassis VCI. In
2013, the fund’s bond-picking in the auto and
industrials sectors again helped it shine. The fund’s
small-cap focus does add some additional risk, and the
fund has stumbled in recent high-yield sell-offs:
Certain energy picks, including offshore driller Atwood
Oceanics ATW, took a toll in 2014. However, these
periods of underperformance have not yet had a
significant impact on the fund’s record. Indeed, from
2010 through February 2015, the fund’s 9.9% gain
outpaced roughly 90% of its peers.
There are good reasons to believe the fund’s edge
is sustainable, including its seasoned management
team and reasonable fee structure. And, importantly
given the fund’s preference for smaller-cap names,
Hotchkis & Wiley has indicated that it will close this
fund at $5 billion. All in all, this fund merits a
Morningstar Analyst Rating of Bronze.
Address:
Hotchkis & Wiley Funds
Los Angeles, CA 90017-5439
866-493-8637
Web Address:
www.hwcm.comInception:
05-29-09
Advisor:
Hotchkis & Wiley Capital Management LLC
Subadvisor:
None
NTF Plans:
Fidelity Instl-NTF, Schwab Instl NTF
Minimum Purchase:
$2500
Add: $100 IRA: $1000
Min Auto Inv Plan:
$2500
Add: $100
Sales Fees:
3.75%L, , 2.00%R
Management Fee:
0.55%
Actual Fees:
Mgt:0.55% Dist:0.25%
Expense Projections:
3Yr:$677
5Yr:$902 10Yr:$1549
Income Distribution:
Monthly
Data through March 31, 2015
Hotchkis & Wiley High Yield A
Ticker Status Yield SEC Yield Total Assets Mstar Category
HWHAX Open 5.4% 5.31% $2,565 mil
High Yield Bond
45
44
23
49
47
43
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 03-15
Historical Profile
Return
Risk
Rating
Average
Average
Neutral
Investment Style
Fixed Income
Income Rtn %Rank Cat
Manager Change
Partial Manager Change
Growth of $10,000
Investment Values of
Fund
Investment Values of
BC Agg Bnd
Performance Quartile
(within Category)
History
10.0
12.0
14.0
16.0
18.0
Portfolio Analysis
02-28-15
Date of
Amount
Value % Net
Total Fixed-Income:137
Maturity
$000
$000 Assets
Aecom 144A 5.875%
10-15-24 22,750 24,229 0.98
Mgm Resorts Intl 7.75%
03-15-22 20,562 23,543 0.95
Cst Brands 5%
05-01-23 21,826 22,644 0.91
Trinseo Matls Oper Sca /
02-01-19 21,652 22,626 0.91
Weekley Homes Llc/ Fin 6
02-01-23 23,503 22,416 0.90
Vtr Fin Bv 144A 6.875%
01-15-24 21,333 22,410 0.90
Harland Clarke Hldgs 144
03-01-21 22,985 22,382 0.90
Numericable Grp Sa 144A
05-15-22 21,718 22,125 0.89
Chs / Cmnty Health Sys 6
02-01-22 20,490 21,924 0.88
Amer Greetings 7.375%
12-01-21 20,385 21,863 0.88
Unit 6.625%
05-15-21 21,535 21,589 0.87
Pinnacle Operating Corpo
11-15-20 20,972 21,496 0.87
Salix Pharmaceuticals 14
01-15-21 19,135 21,479 0.87
Mens Wearhouse 144A 7% 07-01-22 20,206 21,368 0.86
Kosmos Engy 144A 7.875% 08-01-21 22,227 21,005 0.85
Popular 7%
07-01-19 20,772 20,980 0.85
Wells Enterprises Inc. 1
02-01-20 20,152 20,605 0.83
Parsley Engy 144A 7.5%
02-15-22 19,766 20,359 0.82
Phi 5.25%
03-15-19 22,225 20,336 0.82
Geo Grp Inc New 5.875%
10-15-24 19,320 20,334 0.82
Current Investment Style
1
1
Avg Eff Duration
4.0 Yrs
Avg Eff Maturity
.
Avg Credit Quality
B
Avg Wtd Coupon
6.58%
Avg Wtd Price
101.41% of par
figure provided
by fund
Duration
Ltd Mod Ext
Quality
High
Med Low
Special Securities
Restricted/Illiquid Secs
48
Exotic Mortgage-Backed
0
Emerging-Markets Secs
Trace
Options/Futures/Warrants
No
Credit Analysis
% bonds 02-28-15
AAA
0
AA
0
A
0
BBB
5
BB
37
B
43
Below B 8
NR/NA 6
Sector Breakdown
% of assets
Government
6
Corporate Bond
78
Bank Loan
1
Convertible
3
Preferred
3
Agency MBS
0
Non-Agency Residential MBS 0
Commercial MBS
0
Asset-Backed
1
Covered Bond
0
Municipal
0
Cash & Equivalents
8
Other
0
Composition - Net
Cash
7.9
Bonds 83.6
Stocks 2.3
Other
6.1
Coupon Range
% of Bonds Rel Cat
1.00=Category Average
0% PIK
0.0 0.0
0% to 8%
78.3 1.3
8% to 11%
21.7 0.6
11% to 14%
0.0 0.0
More than 14%
0.0 0.0
©
2015Morningstar, Inc.All rights reserved. The information herein isnot representedorwarranted to be accurate, correct, complete or
timely. Pastperformance isnoguarantee of future results.Access updated reports at
To order reprints, call 312-696-6100.
mfb.morningstar.com.
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