Morningstar Advisor - Spring 2007 - (Page 50)

Investments à la Carte A Menu of Ideas to Fill Five Market Baskets Morningstar experts cook up 15 investment picks for income, growth, value, international, and alternative. Use these selections to round out a portion of a portfolio or as the building blocks for a new one. Income MF Harbor Real Return HARRX With inflation posing one of the biggest threats to your clients’ nest egg, Treasury Inflation-Protected Securities make a lot of sense. At last count, there were only 21 available TIPS bonds. With such a limited universe, it’s hard for funds to distinguish themselves. For that reason, we think dirt cheap options such as Vanguard Inflation-Protected Securities VIPSX and iShares Lehman TIPS Bond TIP offer the best route to basic TIPS. If you want to get fancier, however, consider Harbor Real Return. It doesn’t have a long track record, but PIMCO manager John Brynjolfsson is a skilled veteran with TIPS, and the new Harbor fund is far cheaper than the similarly run PIMCO version. Brynjolfsson adds value by making substantial use of off-index plays in true PIMCO style: Top-down considerations can lead him to buy conventional bonds, non-U.S. issues, and currencies, for example. All the while, he keeps a tight lid on the overall risk profile of the fund. Karen Dolan S Mutual Fund Variable Annuity VA Stock MF SA E ETF Value Alternative MF E Municipal Mortgage & Equity LLC MMA S Income MF S VA Separate Account Opportunities to invest in 5%-plus yielding stocks hardly abound. Of the 860 domestic dividend payers that Morningstar covers, only 65 provide a dividend yield exceeding 5%. It’s little wonder that Morningstar’s analysts have taken a shine to Municipal Mortgage & Equity LLC: The stock was sporting a 7%-plus dividend yield in March 2007. MuniMae, as it’s often referred to, is really two businesses: a multifamily-housing lender and a fee-generating tax credit syndicator. Since 1986, the company has financed developers of multifamily housing and other real estate properties. The financing—generally in the form of municipal bonds—is subject to credit risk, but the bonds are secured by both the properties and the rental income from the properties’ tenants, so credit losses are generally minimal. Traditionally, the majority of the firm’s profits (roughly 75% in recent years) are Harbor Real Return Municipal Mortgage & Equity American Skandia Advisors Plan III MF S SA Royce Special Equity Inv First American ZPR Fundamental Small Cap Value PIMCO All Asset iPath Dow Jones-AIG Commodity Index Galliard Capital Management Stable Value Fund SA Growth MF S SA International S MF Allianz RCM Technology The Western Union NB All Cap Core SMA Novartis AG SPDR MSCI All Country World Index ex-US Vontobel Asset Management Emerging Markets Equity SA 50 Morningstar Advisor Spring 2007

Table of Contents Feed for the Digital Edition of Morningstar Advisor - Spring 2007

Morningstar Advisor Spring 2007 Features Departments Letter from Joe Mansueto Get to Know Morningstar’s Fund Managers of the Year Is Your Client a Stock or a Bond? Less Alpha, More Beta Than Meets the Eye Your Mileage May Vary A Clear-Eyed Look at Hedge Funds Lower Risk, Higher Returns, What’s Not to Like? Without Cash and Clout, Advisors and Clients Get Short End of Stick Get the Strategy Minus the Headaches Analyzing Funds of Hedge Funds Not All Hedge Funds Are Created Equal A Fund with a (Long) View Laying Low and Prospering A Menu of Ideas to Fill Five Market Baskets Oil and Gas Gushing with Values Mutual Fund Analyst Picks Undervalued Stocks Most Popular Variable Annuities What’s New at Morningstar and on the Web You Can’t Always Get What You Want

Morningstar Advisor - Spring 2007

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