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Morningstar FundInvestor
May
2015
uses the fund’s very broad mandate. He’s the third
manager in
14
months, so let’s take our time seeing
what territory he marks out. When this fund was
launched in
2008
, the excitement was huge as inves-
tors streamed in. They hoped the fund would be a
winner whether rates rose or dropped, but instead it
had pedestrian returns and stumbled a few times.
We’ll see how it behaves under its new management.
Thornburg International Value TGVAX
Negative $13.1 Billion
Why?
Poor returns have spurred big redemptions,
though the trailing
12
-month return is strong.
That
$13
billion in outflows represents more than
half the fund’s asset base a year ago, and that’s
a problem for an equity fund. The fund was a poor
performer from
2011
–
14
. It will need to sustain
the recent rally to staunch the outflows. Once they
do stop, this
´
-rated fund could be a
decent bet. A bias toward emerging markets and
energy stocks has hurt, but the market can rotate
back at any time.
Fidelity Contrafund FCNTX
Negative $10.2 Billion
Why?
Some of the outflows are due to some retire-
ment plans’ conversion to
CIT
s. The rest is hard
to explain given that performance has remained solid
if unexceptional. I would certainly stick with Will
Danoff as long as he’s at Fidelity Contrafund. His
record is remarkable. To be sure, the fund’s massive
asset base is a handicap, but he’s had great success
with a big fund for many years. We rate it
•
.
PIMCO Low Duration PLDDX
Negative $10 Billion
Why?
Bill Gross was formerly the manager at this
fund. It, too, had a couple of years of weak perform-
ance that no doubt spurred the redemptions. Now,
Scott Mather and Jerome Schneider are at the
helm. Schneider heads
PIMCO
’s short-term desk and
so was a logical addition. We rate the fund
´
because of the talented pair heading it and because
of
PIMCO
’s depth in this area. It’s worth holding on,
though I’d caution against using it as a money market
substitute given that it dips into lower-quality debt.
American Funds Growth Fund of America AGTHX
Negative $7.9 Billion
Why?
Although the trailing three-year returns are
strong, the fund endured a five-year stretch
of pedestrian returns from
2007
through
2011
. This
is one case where redemptions are a plus. The
fund needed to go on a diet, and it has. Now, this
´
-rated fund looks more appealing. It still
has good management and low costs going for it.
I’d stick with it.
PIMCO All Asset All Authority PAUDX
Negative $7.0 Billion
Why?
Lousy recent performance has spurred an
exodus. Rob Arnott thinks emerging markets have far
more appeal than the United States, but the former
have lagged far behind the latter in
2013
and
2014
before outperforming thus far in
2015
. Thus, the
fund’s once-strong record has taken a hit particularly
in recent years. However, a little market rotation
can fix that. We rate the fund
•
, so of course
I’d stay with it.
Columbia Acorn ACRNX
Negative $6.7 Billion
Why?
Performance has slumped badly. We rate
this fund
x
not just because of the slump but
also because outflows are a much bigger problem
for a fund that holds a lot of small caps, as this one
does. Small caps don’t have as much liquidity
as larger names, so it can get ugly when a manager
is forced to sell. They can end up driving down
prices on themselves, and that can spur more redemp-
tions. So, when a small/mid-cap fund like this
has such huge outflows, there’s a real danger that
it will hurt returns. On May
1
, Columbia Acorn
announced lead manager Rob Mohn plans to
retire later this year. That’s another reason to
stay away.
K