Morningstar Advisor - Winter 2008 - 64

Undiscovered Managers Mary Ellen’s business model is the best I’ve seen. My job is to not screw that up. Paul Purcell, CEO of R.W. Baird wants to ensure that cash flows don’t throw that off, even for a day. While such small measures may not seem worth the time for larger funds that take bigger bets, the team here is fighting for every last basis point. Jere McGaffey, a retired partner of Foley & Lardner in Milwaukee and a trustee for multiple trusts, believes in that approach. He has invested with this team for more than 15 years. “For a while, we had two bond managers,” McGaffey says. “As time kept going on, we felt Mary Ellen’s team was superior. When they left and went to Baird, I followed them. I like the basic philosophy: working off an index and trying to add some value to it. In any one year, somebody who has taken a bet on interest rates and was right is going to look better. When you look at Baird’s results over many years, though, they look very good.” Robert Gallagher, former president and COO of Associated Banc-Corp. in Green Bay, Wis., and member of the Green Bay Packers Corp. board of directors, invests part of the Packers’ Preservation Fund with the Baird team. “We knew about the team’s integrity, we knew their Firstar record, and knew they are risk averse,” Gallagher says, “but even though they didn’t take an inordinate amount of risk, they always seemed to beat the benchmark.” Over the years, the Packers also have had an investment banking relationship with Baird, which helped with raising the capital required to renovate Lambeau Field. Investing in Family Stanek’s track record is even more impressive when her other accomplishments are considered. She and her husband have raised three children, and she is actively involved in the community. She sits on several charitable boards, including that of the Boys and Girls Club of Greater Milwaukee. She’s the board chairwoman of her alma mater, Marquette University. Stanek says that all these things have made her a better manager, not worse. She’s gained perspective on investing while building the team the right way. This fact is illustrated in the recent hiring of Meg Hegarty, who had interned at Baird years ago. Hegarty had moved on to work for the asset-backed securities team at Deerfield Capital Management in Chicago, focusing on the management of collateralized debt obligations. The Baird team wanted to add to its mortgage- and asset-backed research efforts, and Stanek knew just whom she wanted for the post. Hegarty jumped at the offer. And while many might think a Milwaukee-based firm would have trouble attracting talent, Baird has found plenty of impressive homegrown individuals to fill its investment ranks and, in cases like Hegarty’s, has attracted people from larger cities. Yards of Success in a Game of Inches In the end, the measure of the Baird team’s success is best illustrated by the results they have delivered shareholders over time in offerings like the Aggregate Bond fund. While it might be tempting to ascribe much of that fund’s success to its low cost, it’s clearly not the whole story. The fund’s price tag provides it an advantage over costlier rivals, but when examining its five-year gross total return (that is, the return before fees are taken out) through Dec. 31, 2007, it still beats 70% of rivals. After fees, the fund jumps to beating 87% of peers. The team has talent, even apart from the fee edge, enough so that investors might also want to make a handshake deal of their own. Karen Dolan, CFA, is a senior mutual fund analyst with Morningstar. Lawrence Jones is a fund analyst with Morningstar. Better Than the Index: Returns of Baird Aggregate Bond Fund minus the returns of the Lehman Brothers U.S. Aggregate Bond Index over rolling threeyear periods since the fund’s inception. 2% 1.6 1.2 .8 03 Data as of Nov. 30, 2007. 04 05 06 07 64 Morningstar Advisor Winter 2008

Morningstar Advisor - Winter 2008

Table of Contents for the Digital Edition of Morningstar Advisor - Winter 2008

Morningstar Advisor - Winter 2008
Contents
Letter from the Editor
Inbox
How Do You Use the Morningstar Style Box?
Real Estate Investing Goes Global
The Golden Touch
Investment Briefs
Learning to Fly with Equity Options
Another Block in Building a Portfolio
In a League of Their Own
Unlock the Box
Fashion Change
The View from the Investment Side
Unpredictable Style
Weighting the Fundamentals
Wire-to-Wire Consistency
The Secret's Out
Focus on Financials
Strongest Homebuilders Will Withstand the Wrecking Ball
Breaking Style Conventions
Playing It Safe with Financials
Back to Bond School
Mutual Fund Analyst Picks
Undervalued Stocks
Most Popular Variable Annuities
New at Morningstar
The Style Counsel
Morningstar Advisor - Winter 2008 - Intro
Morningstar Advisor - Winter 2008 - Morningstar Advisor - Winter 2008
Morningstar Advisor - Winter 2008 - Cover2
Morningstar Advisor - Winter 2008 - 1
Morningstar Advisor - Winter 2008 - 2
Morningstar Advisor - Winter 2008 - Contents
Morningstar Advisor - Winter 2008 - 4
Morningstar Advisor - Winter 2008 - 5
Morningstar Advisor - Winter 2008 - 6
Morningstar Advisor - Winter 2008 - Letter from the Editor
Morningstar Advisor - Winter 2008 - 8
Morningstar Advisor - Winter 2008 - Inbox
Morningstar Advisor - Winter 2008 - How Do You Use the Morningstar Style Box?
Morningstar Advisor - Winter 2008 - 11
Morningstar Advisor - Winter 2008 - Real Estate Investing Goes Global
Morningstar Advisor - Winter 2008 - 13
Morningstar Advisor - Winter 2008 - 14
Morningstar Advisor - Winter 2008 - The Golden Touch
Morningstar Advisor - Winter 2008 - 16
Morningstar Advisor - Winter 2008 - 17
Morningstar Advisor - Winter 2008 - Investment Briefs
Morningstar Advisor - Winter 2008 - 19
Morningstar Advisor - Winter 2008 - 20
Morningstar Advisor - Winter 2008 - 21
Morningstar Advisor - Winter 2008 - Learning to Fly with Equity Options
Morningstar Advisor - Winter 2008 - 23
Morningstar Advisor - Winter 2008 - 24
Morningstar Advisor - Winter 2008 - 25
Morningstar Advisor - Winter 2008 - Another Block in Building a Portfolio
Morningstar Advisor - Winter 2008 - 27
Morningstar Advisor - Winter 2008 - 28
Morningstar Advisor - Winter 2008 - 29
Morningstar Advisor - Winter 2008 - In a League of Their Own
Morningstar Advisor - Winter 2008 - 31
Morningstar Advisor - Winter 2008 - 32
Morningstar Advisor - Winter 2008 - 33
Morningstar Advisor - Winter 2008 - 34
Morningstar Advisor - Winter 2008 - 35
Morningstar Advisor - Winter 2008 - Unlock the Box
Morningstar Advisor - Winter 2008 - 37
Morningstar Advisor - Winter 2008 - 38
Morningstar Advisor - Winter 2008 - 39
Morningstar Advisor - Winter 2008 - Fashion Change
Morningstar Advisor - Winter 2008 - 41
Morningstar Advisor - Winter 2008 - 42
Morningstar Advisor - Winter 2008 - 43
Morningstar Advisor - Winter 2008 - The View from the Investment Side
Morningstar Advisor - Winter 2008 - 45
Morningstar Advisor - Winter 2008 - 46
Morningstar Advisor - Winter 2008 - 47
Morningstar Advisor - Winter 2008 - 48
Morningstar Advisor - Winter 2008 - 49
Morningstar Advisor - Winter 2008 - 50
Morningstar Advisor - Winter 2008 - 51
Morningstar Advisor - Winter 2008 - Unpredictable Style
Morningstar Advisor - Winter 2008 - 53
Morningstar Advisor - Winter 2008 - Weighting the Fundamentals
Morningstar Advisor - Winter 2008 - 55
Morningstar Advisor - Winter 2008 - 56
Morningstar Advisor - Winter 2008 - 57
Morningstar Advisor - Winter 2008 - 58
Morningstar Advisor - Winter 2008 - 59
Morningstar Advisor - Winter 2008 - 60
Morningstar Advisor - Winter 2008 - 61
Morningstar Advisor - Winter 2008 - Wire-to-Wire Consistency
Morningstar Advisor - Winter 2008 - 63
Morningstar Advisor - Winter 2008 - 64
Morningstar Advisor - Winter 2008 - 65
Morningstar Advisor - Winter 2008 - The Secret's Out
Morningstar Advisor - Winter 2008 - 67
Morningstar Advisor - Winter 2008 - 68
Morningstar Advisor - Winter 2008 - 69
Morningstar Advisor - Winter 2008 - Focus on Financials
Morningstar Advisor - Winter 2008 - 71
Morningstar Advisor - Winter 2008 - 72
Morningstar Advisor - Winter 2008 - 73
Morningstar Advisor - Winter 2008 - Strongest Homebuilders Will Withstand the Wrecking Ball
Morningstar Advisor - Winter 2008 - 75
Morningstar Advisor - Winter 2008 - Breaking Style Conventions
Morningstar Advisor - Winter 2008 - 77
Morningstar Advisor - Winter 2008 - Playing It Safe with Financials
Morningstar Advisor - Winter 2008 - 79
Morningstar Advisor - Winter 2008 - 80
Morningstar Advisor - Winter 2008 - Back to Bond School
Morningstar Advisor - Winter 2008 - 82
Morningstar Advisor - Winter 2008 - Mutual Fund Analyst Picks
Morningstar Advisor - Winter 2008 - 84
Morningstar Advisor - Winter 2008 - 85
Morningstar Advisor - Winter 2008 - 86
Morningstar Advisor - Winter 2008 - 87
Morningstar Advisor - Winter 2008 - Undervalued Stocks
Morningstar Advisor - Winter 2008 - 89
Morningstar Advisor - Winter 2008 - 90
Morningstar Advisor - Winter 2008 - 91
Morningstar Advisor - Winter 2008 - Most Popular Variable Annuities
Morningstar Advisor - Winter 2008 - 93
Morningstar Advisor - Winter 2008 - New at Morningstar
Morningstar Advisor - Winter 2008 - 95
Morningstar Advisor - Winter 2008 - The Style Counsel
Morningstar Advisor - Winter 2008 - Cover3
Morningstar Advisor - Winter 2008 - Cover4
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