Morningstar Advisor - February/March 2009 - 59

Mutual Fund PIMCO All Asset D PASDX $19K 17 15 13 S&P 500 TR above the comparable moderate-allocation category median 0.95% charge, but it’s a step in the right direction and improves its appeal. Beyond improved costs, the approach taken at this fund, managed by Rob Arnott of subadvisor Research Affiliates, LLC, should hold considerable interest for investors struggling through the recent market downturn because of the fund’s inflation-fighting focus and absolute-return orientation. Arnott seeks to best the Consumer Price Index by at least 5% and beat the Lehman Brothers U.S. TIPS: 1–10 Year Index over a full economic cycle. To accomplish this, he uses quantitative models that suggest rotations between asset classes, such as inflation-linked securities, commodities, emerging-markets debt, real estate, equities, and other fixed-income sectors, in search of the mix he thinks will effectively meet fund goals. In the wake of the worst stage of the subprimemortgage meltdown and liquidity crisis, the fund saw results suffer as return correlations converged between almost all asset classes, with only Treasuries staying out of negative territory. The fund’s positions in inflation-linked bonds and emerging-markets debt saw losses resulting from diminished inflation expectations and risk aversion, respectively. Still, a low level of equity exposure (7% of assets, compared with the category average 56%), insulated it from the worst damage. Lawrence Jones K 03 04 05 06 07 08 Our hesitation in recommending this fund of funds more forcefully involves the high relative costs of some of its share classes. Recently, however, PIMCO committed to dropping the administration and supervisory fees on the fund’s no-load D share class by 20 basis points (0.20%), making it more competitive. It will still carry a levy likely to be May-03 May-04 May-05 May-06 May-07 May-08 Jun-03Mar-04Dec-04Sep-05Jun-06Mar-07Dec-07Sep-08 Jul-03 Apr-04 Jan-05 Oct-05 Jul-06 Apr-07 Jan-08 Oct-08 Aug-03 Jun-04Mar-05Dec-05Sep-06Jun-07Mar-08Dec-08 Sep-03 Jul-04 Apr-05 Jan-06 Oct-06 Jul-07 Apr-08 Oct-03 Aug-04 Jun-05Mar-06Dec-06Sep-07Jun-08 Nov-03 Sep-04 Jul-05 Apr-06 Jan-07 Oct-07 Jul-08 Dec-03 Oct-04 Aug-05 Aug-06 Aug-07 Aug-08 Jan-04 Nov-04 Nov-05 Nov-06 Nov-07 Nov-08 Feb-04 Feb-05 Feb-06 Feb-07 Feb-08 Hindsight: Spring 2007 A big miss and a good call from the first issue of Morningstar Advisor. Municipal Mortgage & Equity LLC MMAB (formerly MMA) 1.25 $1 Royce Special Equity Investor RYSEX 1.00 .50 $1 S&P 500 0.75 0.50 .75 04/07 12/08 04/07 12/08 There’s no sugarcoating it: We missed the boat on this pick. It has gone nearly to We’re not surprised this small-value fund has handled a brutal market better than zero since we recommended it and has been delisted from the New York most. It’s run by Charlie Dreifus, a veteran value hound with an eye for quality. Stock Exchange. It now trades over the counter under the ticker MMAB. Unlike While many managers are now putting firms’ balance sheets under a microscope, other mortgage-related business, Munie Mae, as it is referred to, didn’t originate or Dreifus has always done so. He has always insisted on firms with low debt, piles of hold any subprime debt. Rather, it was crushed when capital markets froze up, cash, and steady returns on invested capital. That’s a recipe for success in any eliminating sources of funding for its financing activities to developers. market but is especially valuable in an economic downturn. And like all Royce Compounding matters has been the ongoing restatement of the firm’s financial managers, Dreifus isn’t afraid to sit on cash when bargains are scarce. The fund has statements, a costly drain on human resources and a barrier to the firm’s effort to benefitted from several holdings being acquired at premiums over the past year, and access capital. Munie Mae relies on warehouse lines of credit from banks, the proceeds have been mostly kept in cash, which now accounts for 22% of and the lack of audited financials has caused funding to evaporate or to Jan-09 at be reset assets. This fund is in the red since we first recommended it, but it’s down less than May-07 muchJul-07Sep-07 killer combination inMay-08 credit market. The original higher Oct-07 Jan-08 Apr-08 Jul-08Sep-08 Dec-08 nearly all its rivals and the overall market. This fund has a stellar long-term risk/ Jun-07 rates: A Dec-07 Mar-08 illiquid Aug-08 Nov-08 Aug-07 Nov-07 Feb-08 an Jun-08 Oct-08 appeal of Munie Mae was its strong and predictable dividend stream. That is long reward profile, and we continue to recommend it. Michael Breen S&P 500 gone, and a lack of audited financial statements makes it impossible to asses the firm’s value. Michael Breen Apr-07 Dec-08 May-07Jul-07Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Jun-07 Aug-07 Nov-07 Feb-08 May-08Jul-08 Oct-08 Oct-07 Jan-08 Apr-08 Aug-08 Nov-08 MorningstarAdvisor.com 59
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Morningstar Advisor - February/March 2009

Table of Contents for the Digital Edition of Morningstar Advisor - February/March 2009

Morningstar Advisor - February/March 2009
Contents
New on MorningstarAdvisor.com
Letter from the Editor
Contributors
Inbox
How Do You Gauge and Measure Risk?
No Skinny-Dippers Here
Heading to Shore
Investment Briefs
Weapons of Mass Destruction?
Déjà Vu All Over Again
A Failure to Gauge Risk
Five Areas to Find Opportunities
Getting a Read on Risk
Heavenly Returns
Greenspring Comes to the Rescue
How to Spot a Trustworthy REIT
Four Picks for the President
Find Succor in These Large Dividends
These Stocks Are Fiscally Fit
Mutual Fund Analyst Picks
50 Most Popular Equity ETFs
Undervalued Stocks
Most Popular Variable Annuities
New at Morningstar
You Gotta Look Sharpe
Morningstar Advisor - February/March 2009 - Intro
Morningstar Advisor - February/March 2009 - Morningstar Advisor - February/March 2009
Morningstar Advisor - February/March 2009 - Cover2
Morningstar Advisor - February/March 2009 - 1
Morningstar Advisor - February/March 2009 - 2
Morningstar Advisor - February/March 2009 - Contents
Morningstar Advisor - February/March 2009 - 4
Morningstar Advisor - February/March 2009 - 5
Morningstar Advisor - February/March 2009 - New on MorningstarAdvisor.com
Morningstar Advisor - February/March 2009 - 7
Morningstar Advisor - February/March 2009 - 8
Morningstar Advisor - February/March 2009 - Letter from the Editor
Morningstar Advisor - February/March 2009 - Contributors
Morningstar Advisor - February/March 2009 - Inbox
Morningstar Advisor - February/March 2009 - How Do You Gauge and Measure Risk?
Morningstar Advisor - February/March 2009 - 13
Morningstar Advisor - February/March 2009 - No Skinny-Dippers Here
Morningstar Advisor - February/March 2009 - 15
Morningstar Advisor - February/March 2009 - 16
Morningstar Advisor - February/March 2009 - Heading to Shore
Morningstar Advisor - February/March 2009 - 18
Morningstar Advisor - February/March 2009 - 19
Morningstar Advisor - February/March 2009 - Investment Briefs
Morningstar Advisor - February/March 2009 - 21
Morningstar Advisor - February/March 2009 - Weapons of Mass Destruction?
Morningstar Advisor - February/March 2009 - 23
Morningstar Advisor - February/March 2009 - 24
Morningstar Advisor - February/March 2009 - 25
Morningstar Advisor - February/March 2009 - 26
Morningstar Advisor - February/March 2009 - 27
Morningstar Advisor - February/March 2009 - Déjà Vu All Over Again
Morningstar Advisor - February/March 2009 - 29
Morningstar Advisor - February/March 2009 - 30
Morningstar Advisor - February/March 2009 - 31
Morningstar Advisor - February/March 2009 - 32
Morningstar Advisor - February/March 2009 - 33
Morningstar Advisor - February/March 2009 - A Failure to Gauge Risk
Morningstar Advisor - February/March 2009 - 35
Morningstar Advisor - February/March 2009 - 36
Morningstar Advisor - February/March 2009 - 37
Morningstar Advisor - February/March 2009 - Five Areas to Find Opportunities
Morningstar Advisor - February/March 2009 - 39
Morningstar Advisor - February/March 2009 - Getting a Read on Risk
Morningstar Advisor - February/March 2009 - 41
Morningstar Advisor - February/March 2009 - 42
Morningstar Advisor - February/March 2009 - 43
Morningstar Advisor - February/March 2009 - 44
Morningstar Advisor - February/March 2009 - 45
Morningstar Advisor - February/March 2009 - 46
Morningstar Advisor - February/March 2009 - 47
Morningstar Advisor - February/March 2009 - Heavenly Returns
Morningstar Advisor - February/March 2009 - 49
Morningstar Advisor - February/March 2009 - 50
Morningstar Advisor - February/March 2009 - 51
Morningstar Advisor - February/March 2009 - Greenspring Comes to the Rescue
Morningstar Advisor - February/March 2009 - 53
Morningstar Advisor - February/March 2009 - 54
Morningstar Advisor - February/March 2009 - 55
Morningstar Advisor - February/March 2009 - How to Spot a Trustworthy REIT
Morningstar Advisor - February/March 2009 - 57
Morningstar Advisor - February/March 2009 - Four Picks for the President
Morningstar Advisor - February/March 2009 - 59
Morningstar Advisor - February/March 2009 - Find Succor in These Large Dividends
Morningstar Advisor - February/March 2009 - 61
Morningstar Advisor - February/March 2009 - These Stocks Are Fiscally Fit
Morningstar Advisor - February/March 2009 - 63
Morningstar Advisor - February/March 2009 - Mutual Fund Analyst Picks
Morningstar Advisor - February/March 2009 - 65
Morningstar Advisor - February/March 2009 - 66
Morningstar Advisor - February/March 2009 - 67
Morningstar Advisor - February/March 2009 - 50 Most Popular Equity ETFs
Morningstar Advisor - February/March 2009 - 69
Morningstar Advisor - February/March 2009 - 70
Morningstar Advisor - February/March 2009 - 71
Morningstar Advisor - February/March 2009 - Undervalued Stocks
Morningstar Advisor - February/March 2009 - 73
Morningstar Advisor - February/March 2009 - 74
Morningstar Advisor - February/March 2009 - 75
Morningstar Advisor - February/March 2009 - Most Popular Variable Annuities
Morningstar Advisor - February/March 2009 - 77
Morningstar Advisor - February/March 2009 - 78
Morningstar Advisor - February/March 2009 - New at Morningstar
Morningstar Advisor - February/March 2009 - You Gotta Look Sharpe
Morningstar Advisor - February/March 2009 - Cover3
Morningstar Advisor - February/March 2009 - Cover4
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