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Morningstar FundInvestor
November 2016
fee,
American Funds New Perspective
’s
NPFFX
fiscal
2015
net expense ratio was
0
.
81%
, which ranked
in the cheapest quintile of similarly distributed peers.
New Morningstar Analyst Ratings
T. Rowe Price Growth & Income
PRGIX
received its
first-ever rating, a Bronze. Manager Jeff Rottinghaus
has been on the fund since June
2015
but has
successfully used the same strategy at
T. Rowe Price
U.S. Large-Cap Core
TRULX
since
2009
. Factor in
low fees and strong analytical resources, and the fund
is a strong large-cap competitor. Rottinghaus uses
the
200
-
275
stocks in analyst-run fund
T. Rowe Price
Capital Opportunity
PRCOX
as a starting point,
narrowing down the list to around
50
stocks to focus on
the analysts’ best ideas. He emphasizes companies
with good business models and management and con-
siders industry dynamics and valuation, though he
is willing to hold promising secular growers that may
look pricey.
Fidelity Mortgage Securities
FMSFX
is back under cov-
erage with a Silver rating. The fund benefits from an
experienced team, a thoughtful, well-resourced strategy,
and low fees. Manager Bill Irving and comanager
Franco Castagliuolo have distinguished themselves
running pure government options, and they take
a similar approach here. This mortgage-focused fund
has the flexibility to invest modestly in nongovern-
ment fare. At
10%
to
15%
of the portfolio, the latter’s mix
of asset-backed and residential- and commercial-
mortgage-backed securities is enough to push the fund
into the intermediate-term bondMorningstar Category.
The managers avoid significant interest-rate bets and
instead focus on individual security selection. They’ve
been willing to venture into less traveled and therefore
higher-yielding corners of the market, such as float-
ing-rate securities backed by reverse mortgages.
Ratings Changes
PIMCO High Yield
PHYDX
has been upgraded to
Silver from Bronze. It has largely performed as expected
through various market environments, and its deft
navigation of the recent energy-sector troubles, along
with a deep team and inexpensive price tag, support
the upgrade. Since taking over in January
2010
, lead
manager Andrew Jessop has made this fund a
straightforward high-yield offering. The fund uses
the Bank of America Merrill Lynch U.S. High Yield
BB
-B
Rated Constrained Index as its benchmark, which
excludes bonds rated
CCC
or lower. The fund’s higher-
quality approach should minimize volatility over a full
credit cycle relative to peers that take on more credit risk,
but it could lag during risk-on rallies, as it did in
2012
and
2013
when
CCC
bonds rallied. On the other hand,
Jessop and team were early to spot troubles in the
energy and commodities sectors, which put the fund in
the top quintile of its category during the sell-off in
2014
and
2015
.
Invesco Growth and Income
ACGIX
has been down-
graded to Neutral, as the fund doesn’t have a
clear edge following turnover on its investment team.
Comanager Mary Jayne Maly’s retirement in March
2016
still leaves a hole. Maly was the longest-tenured
team member with more than
20
years on board,
and she had been a comanager on the fund since July
2008
. The analysts taking over her health care,
materials, and technology sector responsibilities have
much shorter tenures on the team. New comanager
Matt Titus was comanager of
American Century Large
Company Value
ALVIX
from October
2010
until early
2016
; while the fund’s record during that time does not
belong solely to him, it trailed its benchmark. Lead
manager Tom Bastian remains in place here, but this
fund has lagged its benchmark during his tenure.The
current team must make a case for itself.
Capital Gains Distributions Ahead
As the end of the year approaches, more fund companies
are posting estimating capital gains distributions on
their websites. Royce is one them, and
Royce Premier
RYPRX
—which rebounded nicely after a disappointing
2015
—stands out with an estimated distribution of
14%
of its net asset value. T. Rowe Price Growth
&
Income is
projected to have a similarly large distribution.
Columbia
Acorn
ACRNX
and
Columbia Acorn USA
AUSAX
have estimated distributions exceeding
20%
following
outflows and portfolio manager changes.
K