Morningstar Advisor - February/March 2013 - (Page 44)

Spotlight Manager-of-the-Year Winners Versus Passive Vehicles Name Morningstar Category Fund Size ($ Bil) Annual Report Expense Ratio Morningstar Financial Health Grade Morningstar Rating Total Ret 1-Yr (%) Mairs & Power Growth MPGFX Large Blend 2.5 0.72 B+ QQQQQ 21.9 iShares Core S&P 500 IVV Large Blend 34.9 0.09 B+ QQQQ 15.9 S&P 500 Index — Virtus Foreign Opportunities JVIAX Foreign Large Growth — — B+ — 16.0 1.3 1.45 B+ QQQQQ 19.8 iShares MSCI EAFE Index EFA Foreign Large Blend 38.8 0.34 B– QQQ 17.2 MSCI EAFE Index — — — B– — 17.3 Virtus Emerging Markets Opportunities A HEMZX Diversified Emerging Mkts iShares MSCI Emerging Markets Index EEM Diversified Emerging Mkts 6.7 1.61 A QQQQQ 19.6 48.2 0.68 B– QQQQ 17.3 MSCI Emerging Markets Index — — — B– — 18.2 PIMCO Investment Grade Corporate Bond PBDAX Intermediate-Term Bond 9.6 0.50 — QQQQQ 15.0 iShares Barclays Credit Bond CFT Intermediate-Term Bond 1.4 0.20 — QQQQ 9.1 Barclays US Credit Index — — — — — 9.4 T. Rowe Price Capital Appreciation PRWCX Moderate Allocation 13.7 0.71 B+ QQQQQ 14.7 60% iShares S&P 500 / 40% iShares Barclays Credit Bond — — — — — 12.8 S&P 500 Index — — — B+ — 16.0 TFS Market Neutral TFSMX Market Neutral 1.8 2.47 B– QQQQQ 7.8 PowerShares S&P 500 Low Volatility SPLV Large Value 3.1 0.25 A — 10.0 S&P 500 Index — — — B+ — 16.0 Russell 2000 Index — — — B– — 16.4 Data as of Dec. 31, 2012; portfolio data applies to long positions only. in lieu of more attractive opportunities, as he’s done lately (11.2% of assets). He also generates a dash of income by writing covered calls on a number of holdings. Allocation David Giroux T. Rowe Price Capital Appreciation PRWCX Category Moderate Allocation Analyst Rating David Giroux has found success in adjusting this fund’s overall allocation and tweaking its asset mix. He generally keeps 55% to 65% of assets in stocks, with a single-digit stake in non-U.S. stocks. (As of Sept. 30, the fund’s stock sleeve weighed in at 62% of assets.) On the fixed-income side, he’s favored convertible bonds in the past, but more recently, he’s leaned on leveraged bank loans to the tune of roughly 10% of assets. Giroux tends to not hold a big cash stake, but he’ll hold cash 44 Morningstar Advisor February/March 2013 Each of the fund’s sleeves contributed to the fund’s performance in 2012. Bank loans had a strong showing, with the average bank loan fund notching a 9.4% gain for the year. This fund got a big boost from its bank loan position in Dunkin Brands in particular. Wins on the stock side came from multiple sectors, including top holdings Thermo Fisher Scientific TMO, Apple AAPL, Walt Disney DIS, and Invesco IVZ. The fund’s cash stake buffered the portfolio during the fourth quarter’s dip. In spirit, the fund could be viewed as a largely domestic-stock fund with ample breathing room to dial up or dial down equity risk, so its S&P 500 benchmark is a decent but not perfect yardstick. The fund’s fixed-income and cash exposure mean it’s likely to lag that bogy in sharp equity market rallies, but Giroux has done an admirable job since taking the helm in July 2006. Over the trailing five-year period through November, the fund’s 5.5% annualized gain outpaced the S&P 500’s 1.7%, with one fifth less volatility. Over that stretch, it captured 69% of the S&P 500’s downside—on par with its average moderate allocation peers—but 84% of its upside, or 14 percentage points more than its typical rival. Versus a static 60%/40% split between iShares Core S&P 500 IVV and iShares Barclays Credit Bond CFT, the fund outperformed on an annualized basis by 1.3 percentage points with roughly one fifth more volatility.

Table of Contents for the Digital Edition of Morningstar Advisor - February/March 2013

Morningstar Advisor - February/March 2013
Contents
Contributors
Letter From the Editor
Social Media, the Old- Fashioned Way
Do You Use Active Strategies?
Youth Appeal
How to Buy the Unloved 2013
Morningstar Managers of the Year
Investments á la Carte
Investment Briefs
Approaches to Absolute-Return Investing
In Agriculture, It’s Good to Be Strong
Yes, There Are Good Active Funds
The Decoupling
Where It Could Pay to Be Active
The Active Fund That Defies Obsolescence
The Epitome of an Active Manager
Lines of Communication
The Existence of Market Timing ‘Intelligence’
A Route to Commodities that Bypasses the Futures Market
Best Positioned for Health-Care Reform
Diversified Stock Funds That Earn Their Stars
Our Favorite Mutual Funds
50 Most-Popular Equity ETFs
Undervalued Stocks With Wide Moats
A Twisted Debate

Morningstar Advisor - February/March 2013