(PUB) Investing 2015

Morningstar FundInvestor

May 2015

Leaders

Eventide Gilead

ETAGX

This socially responsible mid-cap growth fund, with

a Morningstar Analyst Rating of

, has been

on a hot streak of late, owing to terrific stock selec-

tion, including electric carmaker

Tesla Motors

TSLA

and several smaller-cap biotech firms. The fund

has bested

98%

of mid-growth peers over the past

year and

99%

of rivals in trailing three- and five-year

periods. Guided by religious and social screens and

a positive screening approach that assesses firms’

values and cultures, the fund’s managers have done

a fine job navigating the market. The fund does

have a fairly high price tag and courts far more vola-

tility than its average peer.

American Funds SMALLCAP World

SMCWX

This

-rated fund has topped

87%

of world-

stock peers over the past year, although most rivals

hold large caps and not small caps. Its managers

have boosted their stake in the red-hot biotech sector

of late, which has boosted performance and increased

the fund’s growth tilt. Downside protection remains

a concern, although some other aspects, including a

low fee hurdle and the managers’ lengthy tenures,

are reassuring. The fund’s multimanager approach

should mute the inherent volatility to some degree.

Vanguard Inflation-Protected Securities

VIPSX

Greater duration has led to solid returns at this fund.

Manager Gemma Wright-Casparius has beaten

almost nine out of every

peers over the past year

by giving this Treasury Inflation-Protected Securities-

only portfolio a longer average duration than its

benchmark and its average peer. The secular decline

in interest rates has benefited the fund, although

that higher duration means more sensitivity to short-

term price movements. Unlike its peers, this fund

sticks to

TIPS

only and shuns instruments like mort-

gage-backed securities, emerging-markets debt,

and corporate bonds. Investors’ biggest concern here

should be price volatility from rising rates.

Laggards

Artisan Small Cap Value

ARTVX

-rated Artisan Small Cap Value is in a

prolonged slump. Its managers favor firms with strong

balance sheets, which has been a major headwind in

a low-interest-rate era that has rewarded leveraged

firms, and made missteps in the energy and techno-

logy sectors, failing to keep up with a changing land-

scape and hanging on to some well-valued firms

too long because of a dearth of attractive new ideas.

This fund has trailed

97%

of small-value peers

over the past year, and its most experienced manager

plans to retire in

2016

and be replaced by a far

less seasoned lead manager. Despite rapid outflows

here, Artisan deserves credit for not reopening this

closed fund until small caps’ valuations are appealing.

Matthews Asian Growth & Income

MACSX

-rated Matthews Asian Growth

Income has

lagged rivals for stylistic reasons. The fund tilts

toward attractively valued, conservative securities

like dividend-paying stocks and convertible bonds,

and such investments typically underperform bolder

equities during stock rallies. The fund has trailed

82%

of its category peers over the past year and

two thirds of rivals since the start of

2015

. A

relatively light stake in China has also left it behind

peers. Over the long term, the fund’s broad and

conservative asset mix should help keep volatility low.

PIMCO Emerging Local Bond

PELAX

This fund’s Morningstar Analyst Rating recently was

downgraded to

from Silver after it suffered

several key manager departures and its Perform-

ance score was lowered to Neutral from Positive.

Focused on local-currency emerging-markets

debt, the fund outperformed its peers from

2009

through

2011

after manager Michael Gomez

made successful duration bets relative to the bench-

mark and benefited from a higher-quality portfolio

during

2011

’s volatile third quarter. Since

2012

the fund has struggled for several reasons, including

its heavy exposure to Brazilian debt.

Contact Robert at

robert.goldsborough@morningstar.com

Ten Worst-Performing Funds

Fund Name

YTD Cat Rank %

Longleaf Partners Interna 100

Matthews Emerging Asia In 100

Vanguard Long-Term Invest 100

CGM Focus

Janus Contrarian T

Oppenheimer Global Opport 99

AMG Yacktman Focused Serv 98

AMG Yacktman Service

Artisan International Val

Loomis Sayles Bond Retail 98

Ten Best-Performing Funds

Fund Name

YTD Cat Rank %

Artisan International Sma

Fairholme Focused Income

Franklin Mutual Beacon A

Longleaf Partners Small-C

Morgan Stanley Inst Growt

Oakmark International Sma

PIMCO Investment Grade Co 1

Sequoia

T. Rowe Price Global Tech

Vanguard Capital Value In

Vanguard TIPS Fund Enjoys

Strong Stretch

Leaders & Laggards

Robert Goldsborough