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13 Morningstar FundInvestor June 2015
Leaders
Western Asset Core Bond WATFX
Blessed with a management team rich in talent
and experience, this fund, which has a Morningstar
Analyst Rating of Silver, has posted outsize
performance over the past year and over longer
periods thanks to an array of well-timed bets.
Its managers’ contrarian position in 2014 favoring
longer-duration bonds paid off nicely. The fund’s
3.7% return for the trailing 12 months ended May 29,
2015, bested 95% of its peers. The fund has greater
credit exposure than the Barclays U.S. Aggregate
Bond Index, including a stake in emerging-
markets bonds and a higher position in nonagency
mortgage-backed securities.
Vanguard Health Care VGHCX
This Gold-rated fund continues to ride the health-care
sector’s wave. For the year ended May 29, 2015,
the fund returned 32.6%. Fueling the fund’s outper-
formance was an overweighting to pharmaceutical
companies, which have shone. Although the fund’s
biotech stake is lower than its peers, its biotech
holdings also outperformed those in its benchmark.
T. Rowe Price Emerging Markets Stock
Fund PRMSX
This Bronze-rated fund enjoyed a boost from
emerging markets’ April 2015 rally. And over the
past year, this fund has topped more than 80%
of its peers, in part through strong stock selection,
especially financials and technology stocks. While
the fund has struggled in the past—particularly
in 2013—it has strong management in lead manager
Gonzalo Pangaro, and it’s attractively priced relative
to its category. Although Pangaro’s copilot, Mark
Edwards, will retire at the end of 2015, that shouldn’t
change this fund’s sound growth strategy.
Laggards
Royce Opportunity RYPNX
While this Bronze-rated small-value fund’s long-
term track record remains strong, it has lagged
recently, trailing 85% of its small-value peers in the
year ended May 29, 2015. Effectively a micro-cap
fund, Royce Opportunity focuses on companies facing
operating challenges. As a result, the fund courts
significant volatility relative to its category. Among
the holdings weighing on this fund’s performance
were newspaper publisher McClatchy MNI,
which has continued to suffer steep declines in
all advertising revenue categories, and ITT
Educational Services ESI, which has been
beset by fraud charges and declining enrollments.
Columbia Acorn International Select LAFAX
An overweighting to energy and poor stock selection
in the energy and basic-materials sectors have
weighed on this concentrated small- and mid-growth
fund’s returns of late. Among the biggest detractors
in the past year have been energy firms like Baytex
Energy BTE and Denbury Resources DNR and
precious-metals firms such as Beadell Resources
BDR, Tahoe Resources TAHO, and Goldcorp GG .
Over the past year ended May 29, 2015, this fund has
trailed 97% of its category peers.
Loomis Sayles Global Bond LSGLX
The managers of this conservatively managed world-
bond fund have lagged their peers and the fund’s
benchmark, the Barclays Global Aggregate Index, over
the past 12 months because of outsize bets on energy
firms’ debt, shorter-duration bonds, euro exposure,
and emerging-markets exposure. The fund has trailed
73% of competing funds over the past 12 months
ended May 29,2015, and 56% of peers over the past
five years. Because of this lackluster recent
performance, the fund’s Morningstar Analyst Rating
recently was downgraded to Bronze from Silver. K
Contact Robert Goldsborough at
Ten Worst-Performing Funds
Fund Name YTD Cat Rank %
Matthews Emerging Asia In 100
Vanguard Long-Term Invest 100
AMG Yacktman Service 99
GoodHaven 99
Greenspring 99
Janus Contrarian T 99
AMG Yacktman Focused Serv 98
FPA Perennial 98
Loomis Sayles Bond Retail 98
Loomis Sayles Investment 98
Ten Best-Performing Funds
Fund Name YTD Cat Rank %
Fairholme Focused Income 1
PIMCO Investment Grade Co 1
Sequoia 1
Thornburg Value A 1
Vanguard Capital Value In 1
American Funds SMALLCAP W2
Eventide Gilead N 2
Fidelity Capital & Income 2
Thornburg International V 2
Century Small Cap Select 3
Western Asset on a Roll
Leaders & Laggards | Robert Goldsborough