Investment Strategy
We seek to pick winning funds with superior management and quantitative characteristics linked to strong performance. Our quantitative research uses the most comprehensive mutual fund database in the world to determine the best strategies for long-term investing success. We then supplement those studies with extensive qualitative research of portfolio managers, analysts, and traders through onsite visits and follow-up phone calls.
 
About the Editor
Russel Kinnel is director of mutual fund research for Morningstar, Inc. and editor of Morningstar FundInvestor, a monthly print newsletter for individual investors. He also writes the Fund Spy column for Morningstar.com, the company's investment Web site.

Since joining the company in 1994, Kinnel has covered the Fidelity, Janus, T. Rowe Price, and Vanguard mutual fund families. He helped develop the new Morningstar Rating for funds and the new Morningstar Style Box methodology. He also is co-author of the company's first book, The Morningstar Guide to Mutual Funds: 5-Star Strategies for Success, which was published in January 2003.

 
 
Aug 30, 2014
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About Russel Russ' Photo
Russel Kinnel,
Director of Fund Research and Editor, Morningstar FundInvestor
Russel Kinnel is director of mutual fund research for Morningstar, Inc. and editor of Morningstar FundInvestor, a monthly print newsletter for individual investors.
Featured Posts
Small Caps Not Invited to Party

The S&P 500 is hitting all-time highs this week, but small caps haven't been invited to the party. For the year to date, funds in large value, large blend, and large growth are up more than 7%. But small-growth funds are down 0.3% through Tuesday, Aug. 26.

Why? It may simply be valuations. Without a big event to explain the discrepancy, we have to get a bit speculative. So, here's my guess: Small caps were trading for quite a bit more than large caps and investors took notice. You may recall that earlier in the year GMO's Ben Inker said he wouldn't touch small caps with a 10-foot pole.

Despite this year's poor results, small growth still claims the best returns for the trailing five years. The typical small-growth fund is up 17.15% as they rebounded brilliantly from the 2007-09 bear market. That compares with 14.8% returns for large value, which is home to most of the big financials stocks. So, this underperformance certainly could continue.

Some Morningstar 500 small-cap funds are, indeed, feeling the pain. Conestoga Small Cap CCASX is down 10.8% for the year to date, followed by Kalmar Growth-with-Value Small Cap KGSCX down 8.3%, Buffalo Small Cap BUFSX down 7.9%, and Ariel Discovery ARDFX down 6.9%.

Not all small-growth funds are suffering, though. Meridian Small Cap Growth MISGX is up 10.8% and Royce Low-Priced Stock RYLPX is up 8.7% with a much-needed rebound. Funds that did well have tended to have more in some of the natural-resources, energy, and basic-materials sectors, while those that are slumping tend to have a fair amount in technology, where performance has been spotty.

A Good Year To Be in India
In case you were curious what the best year-to-date return in the Morningstar 500 is, it belongs to Matthews India MINDX, which is up a huge 48%. It continues our theme of reversals of fortune. The fund lost 5.9% in 2013. If you look out over its history of calendar-year returns, this fund shows just how volatile India is. The prior years before that were a 36% loss, a 33% gain, a 97% gain, and a 63% loss.

 

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