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American Funds Washington Mutual R5
RWMFX
The fund has some strict rules to follow. It aims
to beat the S
&
P
500
’s dividend yield, and
90%
of the
companies it owns must come from the S
&
P
500
.
All companies must meet the listing requirements of
the New York Stock Exchange. It can’t invest in
companies deriving the majority of their revenues
from tobacco or alcohol. The end result is a solid
if unexciting portfolio of dividend-paying value stocks
that has produced consistently solid returns. The
fund is in the top quartile for the trailing five- and
10
-year periods. The retail A shares’ ticker is
AWSHX
.
DFA International Small Company I
DFISX
There aren’t a lot of foreign small/mid-cap funds that
are attractive and still open to new investors. With
two large-cap foreign funds, we wanted a good diver-
sifier that was predominantly small cap. This fund
has one of the lower market caps and one of the
lower expense ratios among the Medalists, so it was
a natural choice.
DFA
runs a passive strategy that
doesn’t track an index. By doing this, it can secure
better prices on stocks for shareholders. It can step in
to buy when there’s an eager seller and sell when
there’s an eager buyer. The fund still behaves like an
index fund, only that trading flexibility helps it
perform a little better.
Dodge & Cox International Stock
DODFX
I’m glad they closed this fund to new investors as it’s
topping out at
$70
billion these days. The strategy
is a straightforward value process that leads manage-
ment to buy good companies with falling valuations.
What makes this a winner, though, is the depth of man-
agement and analysts. Many make a whole career of
their time at Dodge, and thus their long-term interests
are aligned with shareholders’. The fund also charges
a very reasonable fee. The closest open equivalent is
Dodge & Cox Global Stock
DOFWX
.
Harbor Capital Appreciation
HACAX
Jennison Associates may not be quite Dodge
&
Cox,
but the experience and depth at this growth fund are
still impressive. Although Sig Segalas is old enough
to retire should he choose to do so, he has the support
of comanagers Kathleen McCarragher plus three
more comanagers with an average tenure of
25
years.
The
11
analysts have an average tenure of
11
years.
This is a growth fund that tends to do well in market
rallies. With names like
Apple
AAPL
,
FB
,
and
Biogen
BIIB
in the top
10
, the fund is certainly
comfortable with some valuation risk, but long-term
results suggest those risks are acceptable.
Loomis Sayles Bond
LSBDX
Dan Fuss isn’t shy about taking on credit or currency
risk, but he is quite savvy about finding good values
before doing so. It’s a wide-ranging fund that goes
into high-yield and foreign-currency debt whenever it
sees attractive bonds. As with Harbor, this is also
a fund where a transition may be near. Fuss is also
past the standard retirement age, but comanagers
Matthew Egan and Elaine Stokes are skilled investors
who give us confidence that this fund will be worth
owning even after Fuss retires. The fund has the
support of a
40
-member credit team as well as other
groups at the firm. The Retail share class has the
ticker
LSBRX
.
Morgan Stanley Institutional US Real
Estate
MSUSX
Ted Bigman has run this fund since it was launched
20
years ago. He runs a somewhat cautious strategy
that holds up well in downturns while still outper-
forming its peer group. Unfortunately, this fund is
difficult for individual investors to gain access to
outside of a
401
(k).
Oakmark Select
OAKLX
This fund is coming up on its
19
th anniversary, and it
has been in Morningstar’s
401
(k) for about
15
of those
years. Bill Nygren is a big believer in the importance
of good management, though he also wants to buy in
at a modest price. He’s done a remarkable job over
18
years. He said that he has shifted his views on closing
the fund a bit so that he now thinks it’s better to keep
a fund open and attract modest inflows than to close
a fund. However, he acknowledges that a focused
fund like this one does have some capacity limits.
Oppenheimer Developing Markets Y
ODVYX
For those who prefer a pure emerging-markets play,
our plan has Justin Leverenz’s closed fund. Leverenz
focuses on stock selection and pays little heed to
The Funds in Morningstar’s 401(k)
Continued From Cover