Morningstar - Summer 2019 - 54

Spotlight: Fund Industry

PIMCO

Franklin Templeton

Invesco

Parent Rating: ∞ Positive

Parent Rating: ¶ Neutral

Parent Rating: ¶ Neutral

Assets and Flows

Assets and Flows

Assets and Flows

Total Fund Assets (Bil)
$347 (8/150)

1-Yr Flows (Bil)
$2.4 (21/150)

Morningstar Ratings

Total Fund Assets (Bil)
$330 (9/150)

1-Yr Flows (Bil)
-$33.8 (150/150)

Total Fund Assets (Bil)
$306 (10/150)

Medalist Funds
20 (14/150)

Neutral/Negative Funds

Medalist Funds
24 (10/150)

Neutral/Negative Funds

5-Star Funds
23 (24/150)

1-Star Funds

5-Star Funds
60 (9/150)

1-Star Funds

Morningstar Ratings

Medalist Funds
26 (9/150)

Neutral/Negative Funds

5-Star Funds
94 (3/150)

1-Star Funds

8

21

Fees

Morningstar Ratings
21

35

Fees

Avg. Expense Ratio
0.83% (70/150)

Morningstar Fee Level
60% (99/150)

Stewardship

Avg. Expense Ratio
0.83% (72/150)

1-Yr Flows (Bil)
-$11.7 (144/150)

25

99

Fees

Morningstar Fee Level
41% (31/150)

Avg. Expense Ratio
0.59% (24/150)

Stewardship

Morningstar Fee Level
55% (83/150)

Stewardship

Manager Ownership
70% (44/150)

Manager Retention (5 Yr)
89% (120/150)

Manager Ownership
57% (55/150)

Manager Retention (5 Yr)
96% (41/150)

Manager Ownership
26% (77/150)

Manager Retention (5 Yr)
93% (69/150)

Manager Tenure (Yrs)
5.2 (127/150)

Success Ratio (5 Yr)
51% (45/150)

Manager Tenure (Yrs)
12 (24/150)

Success Ratio (5 Yr)
37% (100/150)

Manager Tenure (Yrs)
6.8 (104/150)

Success Ratio (5 Yr)
46% (64/150)

PIMCO's investment culture has long been
successful, if also rigorous, demanding, and
intense. Despite worries that the turmoil after Bill
Gross' 2014 departure might lead others to follow,
there has been notable stability among the
firm's senior investors. Meanwhile, the firm is
taking more steps in succession planning,
elevating the next generation of leaders in the
investment ranks. CIO Dan Ivascyn has facilitated
efforts to inject more diverse views into the
investment process, whether by rotating a wider
range of investment staff through its investment
committee or by incorporating more quantitative
research and risk insights into the workings
of that body. We have taken the firm to task for
failing to share economies of scale for pricing, and
while its expense profile is reasonable in the
U.S., it is decidedly not so in Europe. We would
also prefer to see the firm give more attention to
questions around closing fast-growing funds. That
said, nearly all of the major factors that go into the
firm's Positive Parent rating are improving.

Publicly traded but family managed, Franklin
Resources BEN is parent to Franklin Templeton
Investments. A global asset manager with $734
billion in assets (as of July 2018), the firm has
grown through acquisitions; historically, it has not
interfered with those investment cultures. That
said, Franklin's struggles with outflows in recent
years have led to some changes. While many
active managers have taken steps to attract
investors who favor cheaper, more-passive options,
Franklin launched single-country equity ETFs,
an odd fit in its fund lineup. The firm also made
changes to investment team leadership and
combined some value-equity investment personnel
under the Mutual Series boutique. These
changes are sensible, and the firm has some
strong offerings globally, including its India- and
U.K.-based equity funds. Given the magnitude
of the changes and the longer-term struggles of
much of its U.S. equity, U.S. taxable, and
emerging-markets equity fund lineup, however,
the firm's Parent rating remains Neutral.

Over the past 20 years, publicly traded Invesco IVZ
has expanded its footprint organically and
through acquisitions. Notable additions include
Trimark in Canada and Perpetual in the United
Kingdom in 2000, both of which have been
allowed to maintain investment autonomy, and
PowerShares in 2006, whose lineup comprises
specialty investments including its largest ETF,
PowerShares QQQ. Invesco's strengths span
regions and asset classes. The firm boasts several
long-tenured managers who have built strong
records at some of the firm's most popular funds.
Still, not all teams have had the same success.
For example, the firm's global core equity team has
struggled to regain its footing since most of the
team relocated to Atlanta from San Francisco
in 2014. The transition prompted a bout of turnover,
and the team's flagship products, Invesco Charter
CHTRX and Invesco Mid Cap Core Equity GTAGX,
have posted lackluster results. Investing centers of
excellence are not yet pervasive, keeping the firm's
Parent rating at Neutral. K

Eric Jacobson is a senior analyst with Morningstar
Research Services.

Karin Anderson is an associate director of fixed-income
strategies with Morningstar Research Services.

Gregg Wolper is a senior analyst with Morningstar
Research Services.

54

Morningstar Summer 2019
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