243 / 772
It’s time once more for my annual screen for fantastic
funds. The idea is to be very picky and very quantitative.
I set up a list of key demands I have for a fund and
then see how many pass. This year, only
50
funds out
of a universe of nearly
8
,
000
passed my tests.
Here are the screens:
Cheapest quintile of category.
Past studies show that
funds in the cheapest quintile are a much better
bet than the rest of the investment world, so this is
the first test.
Manager investment of more than $1 million in his or
her fund.
We have tested this and found that funds
where at least one manager has invested more
than
$1
million of his own money are more likely to
outperform than those without such alignment
of interest.
Morningstar Risk rating below the High level.
Our
Morningstar Investor Return studies found that
highly volatile funds are much harder for investors to
hold, and investor returns tend to trail total returns.
Morningstar Analyst Rating of Bronze or higher.
Here, we get a little qualitative, as this fundamental,
forward-looking rating factors in qualitative and
quantitative measures.
Parent grade of Positive.
You want a good steward
with a strong investment culture when you invest for
the long haul.
Returns above
the
fund’s benchmark.
The best time
period for looking at a fund is the manager’s tenure
rather than a standardized time period. So, I start
with the earliest start date of the managers on a
team and insist that the fund beat the benchmark over
that time period. I used returns through April
2015
.
There is a minimum five-year manager tenure, too, to
weed out those with less meaningful track records.
Finally, I throw out institutional share classes to help
you get a list you can use, and I select the cheapest
retail share class.
I didn’t exclude closed funds because many people
still own them and would welcome confirmation that
they are on the right track.
Newcomers
We have seven newcomers and five funds that fell off
last year’s Fantastic
48
, thus leaving us with a total of
50
this year. Let’s start with the newbies.
American Funds New Economy
ANEFX
Declining expenses got the fund past the one hurdle
that kept it off of the list in prior years. The fund
charged
0
.
87%
in
2012
and then dipped to
0
.
83%
in
2013
and
0
.
79%
in
2014
. It holds appeal as one
of American Funds’ smaller funds with
$16
billion
in assets. We rate it Gold for its seasoned team and
sensible approach. Its goal is to span the globe
in search of innovative companies trading at reason-
able prices. The fund consistently invests about a
Fantastic 50
Fund Reports
5
American Funds New World
Merdian Growth
Weitz Value
Morningstar Research
8
Who Fell Out of the Fantastic 50?
The Contrarian
10
T. Rowe’s Challenge
Red Flags
11
New Managers With Something
to Prove
Market Overview
12
Leaders & Laggards
13
Manager Changes and News
14
Portfolio Matters
16
A Bucket Portfolio for Fidelity
Investors
Tracking Morningstar
18
Analyst Ratings
Income Strategist
20
TCW/MetWest Prospers From
PIMCO’s Outflows
Changes to the 500
22
FundInvestor 500 Spotlight
23
Follow Russ on Twitter
@RussKinnel
RusselKinnel, Director of Fund
Research and Editor
FundInvestor
June 2015
Vol. 23 No.10
Research and recommendatio s for the s riou fund investo
SM
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