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 manager 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.

 
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About Russel Russ' Photo
Russel Kinnel,
Director of Manager Research and Editor, Morningstar FundInvestor
Russel Kinnel is director of manager research for Morningstar, Inc. and editor of Morningstar FundInvestor, a monthly print newsletter for individual investors.
Featured Posts
A Conscious Decoupling at Artisan

The team that had managed Artisan Global Value ARTGX and Artisan International Value ARTKX will become two distinct entities as of Oct. 1, 2018. The two funds had been comanaged by Daniel O'Keefe and David Samra for more than a decade, but, with this split, O'Keefe will become the lead manager of Artisan Global Value while Samra will lead Artisan International Value.

Meanwhile, associate managers Justin Bandy and Michael McKinnon will join O'Keefe as comanagers on Artisan Global Value, while associate managers Ian McGonigle and Joseph Vari will join Samra as comanagers on Artisan International Value.

These changes likely reflect a desire to promote and create opportunities for members of the global value team, while also allowing O'Keefe and Samra to run their own shows. Also, each fund will now have its own dedicated resources, with Samra's team based in San Francisco and O'Keefe's team based in Chicago. The two lead managers also believe that this change will allow for greater flexibility within each portfolio, as it will be easier to build and exit positions independently. With both funds' teams remaining intact, they retain their Morningstar Analyst Ratings of Gold.

IVA Funds Reopen
Two Silver-rated funds from IVA have reopened after being closed for seven years. IVA International IVIOX and IVA Worldwide IVWAX have been in outflows in recent years as their conservative value approach has been out of sync with the powerful rally in growth stocks.

As our Silver ratings imply, we still see merit in the funds' approach. The funds are run by Charles de Vaulx and Chuck de Lardemelle in a style made familiar by their former employer, First Eagle. The idea is to be very disciplined about the price paid for an investment so as to protect against losses. They often hold cash and gold for defensive purposes.

The funds charge front loads, and we don't yet know if they will enter No Transaction Fee fund supermarkets the way the rest of the load industry has in recent years.

Harbor International Lowered to Bronze
We have lowered Harbor International HIINX to Bronze. Here is Robby Greengold's take:

Harbor International is under new supervision, but it retains key drivers that make it a worthy holding, including seasoned leadership and a distinctive process. It receives a Morningstar Analyst Rating of Bronze.

Marathon Asset Management replaced manager Northern Cross as this fund's subadvisor effective Aug. 22, 2018. Advisor Harbor made the change after the fund suffered years of heavy redemptions and mediocre performance. The fund suffered a staggering $27.4 billion in outflows over the past three years through July 2018. Although the Northern Cross management team contributed to the fund's outstanding results in the 1990s and 2000s, it struggled to reach those lofty heights after former lead manager Hakan Castegran died in October 2010. Since then, the fund's 5.3% annualized gain edged the MSCI ACWI ex USA Index's 5.1% through July 2018 but lagged the foreign large-blend Morningstar Category's 5.5%.

Marathon's London-based team now runs the fund with a strategy that aims to beat the MSCI EAFE Index. Ten comanagers run separate regionally focused sleeves. The managers are patient, often looking out seven to eight years as they weigh portfolio candidates' long-term prospects. The team invests based on the capital cycle, combing the globe for industries whose profitability profiles are better than the market recognizes. Within the industries they identify as attractive, the team searches for talented corporate managers with multiyear horizons. The team has successfully run a similar separate account for more than three decades.

Harbor estimates that many of the fund's existing holdings will be sold by year-end as Marathon remakes the portfolio. The capital gains hit from the subadvisor change will be brutal for taxable shareholders. Harbor estimates that the fund's 2018 capital gains distribution will be between $23 and $27 per share, which would be more than one third of the $65.38 net asset value as of Aug. 21, 2018. Still, veteran managers, a sound process, and decent fees should serve investors well over the long run.

 

 

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