Morningstar Advisor - October/November 2013 - (Page 56)

Undiscovered Managers David Corkins Meridian Growth Legacy MERDX $18K 12 S&P 500 TR (IA Extended) (Index) 09/ 08 09/ 09 09/ 10 09/ 11 09/ 12 12-Sep 12-Aug 12-Oct Category Expense Ratio (%) 8-Sep 9-Feb 9-Jul 9-Dec 10-Jun 10-Dec 11-Jun 11-Dec 12-Jun 12-Dec 13-Jun 8-Oct 9-Mar9-Aug10-Jan 10-Jul 11-Jan 11-Jul 12-Jan 8-Nov 9-Apr 9-Sep10-Feb 10-Aug 11-Feb 11-Aug 12-Feb 12-Nov13-May 8-Dec9-May 9-Oct10-Mar10-Sep11-Mar11-Sep12-Mar 9-Jan 9-Jun 9-Nov10-Apr 10-Oct 11-Apr 11-Oct 12-Apr 13-Jan 13-Jul 10-May10-Nov11-May11-Nov12-May 13-Feb 13-Aug 13-Mar13-Sept 13-Apr 12-Jul Mid Growth 0.87 12-Nov Morningstar Rating QQQQ 5-Yr Annl Total Rtn (%) 11.04 Minimum Investment $1,000 5-Yr Total Rtn % Rank Cat 12 Data as of Aug. 31, 2013 Meridian Contrarian Legacy MVALX $16K 11 S&P 500 TR (IA Extended) (Index) 09/ 08 09/ 09 09/ 10 09/ 11 09/ 12 9/1/2012 Category Expense Ratio (%) 9/1/2008 5/1/2009 1/1/2010 9/1/2010 5/1/2011 1/1/2012 10/1/20126/1/2013 10/1/20086/1/2009 2/1/201010/1/20106/1/2011 2/1/2012 11/1/20127/1/2013 11/1/20087/1/2009 3/1/201011/1/20107/1/2011 3/1/2012 12/1/20128/1/2013 12/1/20088/1/2009 4/1/201012/1/20108/1/2011 4/1/2012 1/1/2013 1/1/2009 9/1/2009 5/1/2010 1/1/2011 9/1/2011 5/1/2012 2/1/2013 2/1/200910/1/20096/1/2010 2/1/201110/1/20116/1/2012 3/1/2013 3/1/200911/1/20097/1/2010 3/1/201111/1/20117/1/2012 4/1/2013 4/1/200912/1/20098/1/2010 4/1/201112/1/20118/1/2012 5/1/2013 Mid Growth 1.16 Morningstar Rating QQQ 5-Yr Annl Total Rtn (%) 6.6 Minimum Investment $1,000 5-Yr Total Rtn % Rank Cat 66 Data as of Aug. 31, 2013 56 Morningstar Advisor October/November 2013 return over a 28-year stint, outpacing the typical peer by two percentage points. Under Meade and Schaub, the fund is likely to diverge from its historical profile in several ways. First, Meridian Growth will become more diversified. At Janus Triton, the pair ran a portfolio of 70 to 90 holdings. They’ve also stated that they will largely wind down the fund’s existing large-cap holdings, restricting it to stocks roughly below the $10 billion market-cap mark. The fund is also likely to sport energy stocks, too, because Janus Triton owned those types of firms. In all, shareholders 05/ should expect the fund’s 11 historically low turnover to increase in the near-term as the new managers reposition the fund. There’s reason to be patient. During their seven-year tenure at Triton, Meade and Schaub beat 95% of their peers and easily beat the Russell 2500 Growth Index. Aster’s influence won’t completely fade away. Current comanager William Tao, who worked closely with Aster for five years, will remain in that position. Meridian Value, also under review by Morningstar, won’t undergo as many changes. Its name will change to Meridian Contrarian but longtime managers Jamie England and James O’Connor remain in place and continue searching for firms they believe can rebound from05/ or three disappointing two 11 quarterly earnings reports. England will relinquish his role on Meridian Growth, which he undertook when Aster died. One notable change will be the addition of Larry Cordisco as comanager. Cordisco helped run the fund for eight years before leaving the firm in 2011. He came back when Aster died and is staying. Making the Pitch Arrowpoint will have its work cut out for it with reversing asset outflows. Meridian Growth saw more than $750 million leave its coffers the past year. Some of those outflows are probably due to the perception that Meridian Growth won’t be able to duplicate its past success without Aster at the helm. “You have to ask yourself what was the original reason for getting in. Was the team smart? Experienced? Did it have a great track record?” says Rob Brown, the chief investment strategist at Newport Beach, Calif.-based United Capital Financial Advisers. “If those reasons still hold, you should stick around. If they don’t, you should get out.” Corkins and team realize that. They are familiar with the problems flows—both positive and negative—can cause from their time at Janus. “We each started managing small pools of assets and grew them. We saw the drawbacks of that,” says Corkins. “We want to grow over time, but in a methodical way.” Corkins also thinks Meade and Schaub will be able to build at Meridian Growth the kind of track record they did at Janus Triton. If that happens, it should alleviate a lot of investors’ concerns. Corkins and Reidy, though, want to build a firm whose reputation extends beyond performance. While launching additional funds or buying other firms is a possibility, Corkins and Reidy have turned down offers to run strategies that were outside their wheelhouse despite the fees such work would have garnered. Arrowpoint also isn’t gutting the Meridian board. Indeed, all of the current trustees remain in place. Fees should remain stable. In addition, Meade and Schaub are committed to moving a substantial chunk of their personal wealth into Meridian Growth right alongside shareholders. (Each manager had more than $1 million in Janus Triton). From Corkins’ perspective, the deal puts strong managers at the helm of all of the Meridian Funds. The managers “are going to be able to keep doing what they do well.” K Rob Wherry is the associate editor of Morningstar Advisor magazine.

Table of Contents for the Digital Edition of Morningstar Advisor - October/November 2013

Morningstar Advisor - October/November 2013
Contents
Contributors
Letter From the Editor
How to Make Social Media Work for You
Do Mutual Funds Still Have a Role?
More Personal Than Finance
How to Handle Your TIPS Positions
A Real Estate Veteran Starts From Scratch
Investments á la Carte
Investment Briefs
When to Say No
Take a Guarded Approach to Homebuilders
Fund Distribution Has Been Turned on Its Head. Now What?
Winning the Distribution Battle
Active ETFs Wait for Their Heyday
A Fund Firm Defies Indexing Trend
Piloting New Channels
A Good Fit
The Predictive Power of Fair Value Estimates
Does Being Prudent Pay Off?
Utilizing Utilities’ Total Return
Stuck in the Middle Is Not a Bad Place to Be
Our Favorite Mutual Funds
50 Most-Popular Equity ETFs
Undervalued Stocks With Wide Moats
The Good Guys Win

Morningstar Advisor - October/November 2013