(PUB) Investing 2016

Morningstar FundInvestor

August 2016

Leaders

Manning & Napier Equity

EXEYX

has outperformed

99%

of its large-growth peers for the year to date.

Although the management team’s penchant for siza-

ble sector bets has backfired at times, it’s helped

the fund this year. The fund has benefited from its

overweighting to strong-performing basic-materials

stocks: Chemical producer

Ashland

ASH

and agricul-

ture giant

Monsanto

MON

are both up more than

10%

this year. Strong stock selection in the healthcare

sector also helped returns:

Alere

ALR

rose sharply

after announcing it would be acquired by

Abbott Lab-

oratories

ABT

—though the team has since sold

its stake—and

Intuitive Surgical

ISRG

is up

27%

Lazard Emerging Markets Equity

LZOEX

, with a

Morningstar Analyst Rating of Silver, has excelled thus

far in

2016

, outperforming

95%

of its diversified

emerging-markets peers. The fund has benefited from

its overweightings to strong-performing Brazilian,

Russian, and Indonesian stocks. Additionally, the fund

has an underweighting in Chinese stocks, which

have bounced around this year. Top individual contrib-

utors to performance include banks

Banco do Brasil

and

Sberbank of Russia

SBER

and auto firms

Localiza

Rent A Car

and

Imperial Holdings

IPL

, all of which

are up more than

35%

this year.

Gold-rated

Vanguard REIT Index

VGSLX

has outper-

formed

99%

of its real estate peers in

2016

. The

fund has

100%

of investments in North America; the

typical real estate fund has

91%

, and this year

Brexit hit foreign currencies hard. Strong-performing

REIT

s this year include

Realty Income

EPR

Properties

EPR

, and

National Retail Properties

NNN

all of which are up more than

35%

Laggards

Bronze-rated

Fidelity Leveraged Company Stock

FLVCX

has lagged

97%

of its mid-cap-value peers thus far

2016

. Lead manager Thomas Soviero invests primarily

in firms with debt/capital ratios in excess of

50%

and below-investment-grade credit ratings, which make

this fund much more volatile than its typical peer.

Despite having an overweighting in strong-performing

basic materials, its top holding in that sector—

LyondellBasell Industries

LYB

—is down

this

year. Additionally, the fund’s overweighting to poor-

performing airlines—such as

Delta Air Lines

DAL

Southwest Airlines

LUV

and

American Airlines

AAL

—

have dragged on results.

Bronze-rated

Matthews India

MINDX

has trailed all

of its India equity peers for the year to date. This

fund’s managers readily consider lesser-known and

smaller-cap stocks, so it’s distinct from its typical

peer. The fund has been hurt this year by subpar stock

selection in the technology and financials sectors.

Detractors include online media firm

Just Dial

JUST-

DIAL

, software firm

MindTree

MINDTREE

, and

banking firm

IDFC Bank

. The fund’s underweighting

to strong-performing basic-materials stocks has

also dragged on results.

Neutral-rated

Metropolitan West High Yield Bond

MWHYX

has lagged

95%

of its high-yield bond peers

2016

. The managers make big adjustments to

the fund’s quality tilt depending on their view of the

current stage of the credit cycle. The team believes

that the economy is in the late stages of the credit cycle,

so it has kept a light stake in rallying junk bonds.

Additionally, the fund’s

20%

-plus energy stake in late

2014

hurt as oil prices plummeted, while the team’s

decision to cut that stake to roughly

and instead

hold a

20%

-plus cash stake as of March

2016

meant the fund missed out on the second quarter’s

energy rally.

Contact Andrew Daniels at

andrew.daniels@morningstar.com

10 Worst-Performing Funds

Fund Name

YTD Cat Rank %

Matthews India Investor

100

FPA US Value

Fidelity Independence

Oakmark Global I

Sequoia

Touchstone Sands Capital

Scotia Dynamic U.S. Growt 98

Dreyfus Opportunistic Sma 97

Fidelity Leveraged Compan 97

Litman Gregory Masters In

10 Best-Performing Funds

Fund Name

YTD Cat Rank %

Artisan Value Investor

Champlain Mid Cap Adv

Fairholme Focused Income

GoodHaven

Jensen Quality Growth J

Longleaf Partners

Mairs & Power Growth Inv

Manning & Napier Equity S

PIMCO Inflation Response

Permanent Portfolio Perma

Manning & Napier Gets Its Groove Back

Leaders & Laggards

Andrew Daniels