CHICAGO, Jan. 3, 2013—Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today announced its 2012 U.S. Fund Manager of the Year award winners. The awards acknowledge managers who not only delivered impressive performance in 2012, but also excellent long-term risk-adjusted returns, and who have been good stewards of fund shareholders’ capital. This year, Morningstar introduced new awards for two types of strategies—allocation and alternatives—in addition to domestic stock, international stock, and fixed income. To recognize outstanding fund managers each year, Morningstar selects leaders in each type of strategy. The 2012 Fund Manager of the Year award winners in the United States are:
Domestic-Stock Fund Manager of the Year:
Bill Frels and Mark Henneman, Mairs and Power Growth (MPGFX)
International-Stock Fund Manager of the Year:
Rajiv Jain, Virtus Foreign Opportunities (JVIAX) and Virtus Emerging Markets Opportunities (HEMZX)
Fixed-Income Fund Manager of the Year:
Mark Kiesel, PIMCO Investment-Grade Corporate Bond (PIGIX)
Alternatives Fund Manager of the Year:
The team of Eric Newman, Kevin Gates, Larry Eiben, Richard Gates, Chao Chen, and Yan Liu, TFS Market Neutral (TFSMX)
Allocation Fund Manager of the Year:
David Giroux, T. Rowe Price Capital Appreciation (PRWCX)
“Despite a high level of economic and political uncertainty this past year, broad swaths of the market performed better than many investors would have expected, and each of our fund managers of the year have added value relative to their own benchmarks and broader peer groups, not just in 2012 but over the long haul,” said Scott Burns, director of North American fund research for Morningstar. “We introduced awards for fund managers overseeing allocation and alternative strategies this year to recognize the growing investor interest in these areas. Interest in strategies using multiple asset classes has grown over the past 20 years, especially with the emergence of target-date funds and more flexible, go-anywhere funds pursuing a range of different goals. Assets in funds employing alternative strategies rose about 21 percent in 2011, and then another 16 percent through November 2012.”
Domestic-Stock Fund Manager of the Year: Bill Frels and Mark Henneman, Mairs and Power Growth (MPGFX)
At Mairs and Power Growth, Bill Frels and Mark Henneman have produced one of the best long-term records of any large-blend fund. Since Frels became co-manager in 1999, the fund has beaten all but one of its large-blend category peers and trounced the SandP 500 with an 8.2 percent annualized gain through year-end 2012.
"The managers follow an extremely patient approach—of the fund’s top 25 holdings, 18 were bought in the 1990s and 17 of those have remained in the portfolio for at least 10 years,” said Michael Herbst, director of active fund research for Morningstar. “The managers’ success stems from a deep understanding of their holdings and their preference for companies that can increase earnings in difficult economic environments. While the basic materials and industrials sectors were two of the worst-performing sectors in 2012, the fund’s holdings in those sectors boosted its returns, including paint and coatings firm Valspar, cleaning-products maker Ecolab, and chemicals firm H.B. Fuller.”
The $2.5 billion fund has a Morningstar Analyst Rating™ of Silver, the company’s second-highest Medalist rating, along with a Morningstar Rating™ of 5 stars for its past risk-adjusted performance. Among all the 2012 nominees for Domestic-Stock Fund Manager of the Year, Mairs and Power Growth offers the lowest fees with a 0.72 percent expense ratio.
International-Stock Fund Manager of the Year: Rajiv Jain, Virtus Foreign Opportunities (JVIAX) and Virtus Emerging Markets Opportunities (HEMZX)
Rajiv Jain has managed Virtus Foreign Opportunities since 2002, and Virtus Emerging Markets Opportunities since 2006. He follows a high-conviction approach regardless of market trends and is willing to hold portfolios that look very different than the benchmark. The strategy has served him well—his funds have landed in the top decile of performance for most periods under his management. Through Dec. 31, 2012, the $1.3 billion JVIAX posted a 11.1 percent annualized return for the 10-year period while HEMZX, with $6.7 billion in assets, had a 17.4 percent annualized return for the same period.
“Jain’s approach has produced attractive risk-adjusted returns over his tenure, especially compared with other emerging-markets funds. His relatively high exposure to Indian stocks worked well for the fund in both 2011 and 2012 despite a lagging Indian market in 2011,” Herbst said. “He looks for companies with strong balance sheets, steady growth rates, and straightforward business models, with a heavy tilt to consumer-product companies, which have helped him weather market downturns.”
He has more than $1 million invested in the two funds combined. JVIAX and HEMZX have a 1.47 percent and 1.62 percent expense ratio, respectively. Both funds have a Silver Analyst Rating and a 5-star Morningstar Rating for risk-adjusted performance. Jain is employed by Vontobel Asset Management, which sub-advises the Virtus funds.
Fixed-Income Fund Manager of the Year: Mark Kiesel, PIMCO Investment-Grade Corporate Bond (PIGIX)
Mark Kiesel is the 10-year manager of one of the best-performing corporate bond funds over both long- and short-term periods: the fund has an 11.1 percent three-year annualized return and a 10.7 percent five-year annualized return. The fund's average annual gain of 8.2 percent since he joined in December 2002 through April 2012 is the second-best showing in the intermediate-term bond category. For 2012, the $10.2 billion fund gained 15 percent.
“Kiesel’s long-standing bet on banks paid off this year, along with his selective exposure to companies in cyclical industries. He balances PIMCO’s overall firm views on the global economy with his ability to pick securities from the bottom up,” Herbst said. “There’s a lot of complexity to the techniques employed in the portfolio, and Kiesel has executed them well. He looks for margins of safety but doesn’t shun credit risk—the fund’s exposure to contingent capital securities issued by Lloyds TSB, a more esoteric and riskier type of holding, was one of his best-performing positions this year.”
The fund has a Silver Analyst Rating, a 5-star Morningstar Rating for risk-adjusted performance, and an expense ratio of 0.5 percent. In 2010, Kiesel was nominated in the same category.
Alternatives Fund Manager of the Year: The team, TFS Market Neutral (TFSMX)
TFS Market Neutral is one of the oldest funds in the market-neutral category, with an eight-year track record and $1.8 billion in assets. In 2012, the fund achieved the highest absolute return of 7.8 percent in its category, and its risk-adjusted return (daily annualized Sharpe ratio) ranked fourth. The fund’s quantitative small-cap equity-focused strategy also produced a significant positive alpha relative to the Russell 2000, as it has done in all but two years since inception.
“It's unusual for a quantitative fund to have such consistent, positive performance, but the team behind the models is really what drives results. The six listed portfolio managers come from quantitative backgrounds and are supported by a small group of analysts, programmers, and traders who regularly help test existing models and build new ones,” said Nadia Papagiannis, CFA, director of alternative funds research for Morningstar. “The team is also always looking for new strategies, and performs back-testing analysis at least once a year, or if a strategy performs unexpectedly.”
TFS Market Neutral is currently the only alternative mutual fund with a Gold Analyst Rating. The fund has a 5-star Morningstar Rating for risk-adjusted performance, and a 2.47 percent expense ratio. Five of the six portfolio managers on the team are equity partners at the employee-owned firm, which requires management to invest 50 percent of their liquid net worth in TFS’ managed products.
This is the first year Morningstar has awarded an Alternatives Fund Manager of the Year award. Morningstar defines alternative investments as those that do not fit neatly in its traditional equity or fixed-income style boxes—either because they invest in different asset classes, take long and short positions, or because they are illiquid.
Allocation Fund Manager of the Year: David Giroux, T. Rowe Price Capital Appreciation (PRWCX)
David Giroux joined the fund in 2006, and since then has beaten 97 percent of moderate-allocation category peers, delivering top-decile returns on a risk-adjusted basis. Giroux follows a straightforward asset allocation approach, generally investing 55-65 percent of assets in equities and the rest in a mix of fixed income and cash. For most of his tenure, Giroux has favored convertible bonds, and more recently, leveraged loans, in the fixed-income segment of the fund.
“Giroux’s stellar performance in 2012 came from multiple areas, including his stock selection and a strong showing from the fund’s bank loan stake. Top holdings across multiple sectors, such as Thermo Fisher Scientific, Walt Disney, and Invesco, fueled the fund’s gains in 2012, but Giroux has successfully taken full advantage of T. Rowe Price’s deep research operation over the long term, too,” said Laura Lutton, director of fund-of-funds research for Morningstar. “The $13.7 billion fund returned nearly 14.7 percent for the year, and remains an excellent core holding.”
The fund has earned a Gold Analyst Rating and has a 5-star rating for risk-adjusted performance. Giroux has more than $1 million invested in the fund, and the fund’s 0.71 percent expense ratio is below average for the category.
This is the first year Morningstar has awarded an Allocation Fund Manager of the Year award. Fund managers considered for this award must run funds that combine at least two asset classes in a single portfolio.
Established in 1988, the Morningstar Fund Manager of the Year award recognizes portfolio managers who demonstrate excellent investment skill and the courage to differ from the consensus to benefit investors. To qualify for the award, managers’ funds must have not only posted impressive returns for the year, but the managers also must have a record of delivering outstanding long-term risk-adjusted performance and of aligning their interests with shareholders’. Nominated funds must be Morningstar Medalists—a fund that has garnered a Morningstar Analyst Rating of Gold, Silver, or Bronze. The Fund Manager of the Year award winners are chosen based on Morningstar’s proprietary research and in-depth qualitative evaluation by its fund analysts.
All year-end figures cited in this press release are preliminary and subject to change.
For Morningstar’s article about the winners, go to: http://www.morningstar.com/goto/fmoy2012. For the complete list of past and current winners, go to: http://corporate.morningstar.com/FMOYhalloffame.
About Morningstar, Inc.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individuals, financial advisors, and institutions. Morningstar provides data on more than 385,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 8 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its registered investment advisor subsidiaries and has approximately $195 billion in assets under advisement and management as of Sept. 30, 2012. The company has operations in 27 countries.
Analyst Ratings are subjective in nature and should not be used as the sole basis for investment decisions. Analyst Ratings are based on Morningstar’s current expectations about future events and therefore involve unknown risks and uncertainties that may cause Morningstar’s expectations not to occur or to differ significantly from what was expected. Morningstar does not represent its Analyst Ratings to be guarantees nor should they be viewed as an assessment of a fund’s or the fund’s underlying securities’ creditworthiness.
# # #
©2013 Morningstar, Inc. All Rights Reserved.