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Morningstar’s 2016 U.S. Fund Manager of the Year Award Winners Achieved Long-Term Success, Impressive 2016 Performance

CHICAGO, Jan. 25, 2017—Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today announced its 2016 U.S. Fund Manager of the Year award winners. The awards, to be featured on CNBC’s “Power Lunch” program today, acknowledge managers who delivered impressive performance in 2016, have generated excellent long-term risk-adjusted returns, and have been good stewards of fund shareholders’ capital.

To recognize outstanding fund managers, Morningstar selected leaders in four categories: domestic stock, international stock, fixed income, and allocation/alternatives. Morningstar analysts look across all managed products that receive a Morningstar Analyst Rating™ to identify the industry’s best managers.

“Active managers faced many challenges in 2016 including market headwinds and heavy redemptions as investors moved their assets to passive investments. In the face of those trends, these managers stood out for remaining steadfast in their investing approach, which paid off for investors last year,” Laura Pavlenko Lutton, Morningstar’s director of manager research, North America, said. “These Fund Managers of the Year also deserve recognition for the skill they’ve demonstrated, amassing impressive long-term records while demonstrating a commitment to shareholders.”

The 2016 Fund Manager of the Year award winners in the United States are:

Domestic-Stock Fund Manager of the Year: David Wallack, T. Rowe Price Mid-Cap Value (TRMCX)
Manager David Wallack has successfully run T. Rowe Price Mid-Cap Value using solid research, patience, and a risk-conscious process since 2000. Below-average fees and a willingness to close the fund to new investors, as it has been since 2010, help earn the fund a Morningstar Analyst Rating of Gold, Morningstar’s highest Medalist rating, and Positive scores for all five pillars of the Analyst Rating—Process, Performance, People, Parent, and Price. Wallack’s stock picks also contribute greatly to the fund’s success—he is often willing to invest in unpopular companies that are facing pressure, such as Sysco, and will hang on during a turnaround. He assesses valuation through various lenses, considering “hidden assets” or potential mergers or spinoffs that may boost value. Since Wallack’s start, the fund has outperformed the benchmark by 100 basis points annualized on a total-return basis and by a wider margin on a risk-adjusted basis.

“David’s success in stock picking is mainly a result of his careful research and thoughtfulness dedicated to each company he invests in,” Lutton said. “The fund landed in the category’s top decile and outpaced the benchmark by more than 4 percentage points in 2016. It maintained an edge on a risk-adjusted basis, landing in the category's sixth percentile for the same period.”

International-Stock Fund Manager of the Year: David Herro, Oakmark International (OAKIX)
David Herro has been this fund’s lead manager since its 1992 inception and was Morningstar’s 2006 International-Stock Fund Manager of the Year and International-Stock Fund Manager of the Decade for 2000-2009. Oakmark International has a Gold Analyst Rating and Positive scores for all five pillars of the Analyst Rating. His approach is to invest in everything from growth stocks that have dipped to deep value plays. Most notable is his investment in shares of UK-based miner Glencore, which fell sharply in 2015 amid fear it wouldn’t be able to service its debt. Herro recognized the opportunity and invested heavily in the company in the latter half of that year. Due to management actions and rising prices of primary metals, the stock rose 204 percent in 2016. Oakmark International reopened to new investors in July 2016 following significant outflows since it closed in 2013.

“David is not afraid to buy out-of-favor stocks and wait for improvement,” Lutton said. “His patience keeps paying off; the fund has beaten more than 90 percent of its category peers over the trailing five, 10, and 15 years.”

Fixed-Income Fund Manager of the Year: Ford O’Neil and team, Fidelity Total Bond (FTBFX)
Ford O’Neil and his team of portfolio managers have provided consistent leadership and strong risk-adjusted results for investors in 2016 and in years past. Instead of betting on interest-rate trends, they aim to perform in the top half of their intermediate-term bond category over rolling 36-month periods by making sector, yield curve, and individual security selections. A low 0.45 percent expense ratio helps the fund stay competitive year in and year out. The fund boasts an Analyst Rating of Gold and ranked in the fourth percentile of the competitive intermediate-term bond category for 2016, due to an underweight in mortgages, an overweight in high yield, and strong security selection in financials and energy as well as a Treasury Inflation-Protected Securities (TIPS) position.

“Given the fund’s structural exposures to high yield and credit in the previous year, combined with excellent security selection in those allocations, 2016 provided a strong showcase of what Ford and his team do well,” Lutton said. “In the past, this fund’s performance has been aided by strong security selection and sector allocations.”

Allocation/Alternatives Fund Manager of the Year: Equity and Fixed-Income Investment Policy Committees, Dodge and Cox Balanced (DODBX)
The deep and experienced management team at Dodge and Cox Balanced has a sound process, a rock-bottom expense ratio of 0.53 percent, and a strong long-term performance record. The fund is led by Dodge and Cox’s equity and fixed-income investment policy committees, whose members have been with the firm for an average of more than 20 years. The fund brings together a low-turnover, value-oriented equity portfolio and a distinctive fixed-income portfolio with an emphasis on corporate bonds. The fund has a Gold Analyst Rating, scores Positive for all five pillars, and posted a gain of 16.6 percent in 2016, besting 97 percent of its peers in Morningstar’s Allocation 50 to 70 percent Equity category.

“On the equity side, a rebound in financials stocks, such as Bank of America and Goldman Sachs, and prudent picks in the technology and consumer cyclicals sectors helped drive results,” Lutton said. “In credit, the fund benefited from its overweighting to rallying corporate credit names, such as Pemex and Teck Resources, as well as its long-time short duration stance as interest rates rose. In allocation, the fund’s nearly 70 percent equity exposure was more than most peers, which helped in a rallying equity market.”

For Morningstar’s article about the winners, please click here. Live updates from the award announcement beginning today at 12 p.m. CT will be available on Twitter at http://www.twitter.com/MorningstarInc or through the hashtag, #MstarAwards.

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. The Fund Manager of the Year award winners are chosen based on research and in-depth qualitative evaluation by Morningstar’s Manager Research Group. 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. In 2016, Morningstar introduced the forward-looking Analyst Rating for ETFs, signaling Morningstar analysts’ conviction in a fund’s ability to outperform relevant peers, including both mutual funds and ETFs, on a risk-adjusted basis over a full market cycle. For more information about the Morningstar Awards, please click here.

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 individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. Morningstar provides data on nearly 540,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on approximately 18.5 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 investment advisory subsidiaries, with more than $200 billion in assets under advisement and management as of Sept. 30, 2016. The company has operations in 27 countries.

Morningstar’s Manager Research Group consists of various wholly owned subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC. 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 Manager Research Group’s current expectations about future events and therefore involve unknown risks and uncertainties that may cause such expectations not to occur or to differ significantly from what was expected. Analyst Ratings are not guarantees nor should they be viewed as an assessment of a fund’s or the fund’s underlying securities’ creditworthiness. This press release is for informational purposes only; references to securities in this press release should not be considered an offer or solicitation to buy or sell the securities.

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©2017 Morningstar, Inc. All Rights Reserved.


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