• / Free eNewsletters & Magazine
  • / My Account
Home>Research & Insights>Investment Insights>The Top-Performing Funds in 2011's Toughest Category

Related Content

  1. Videos
  2. Articles
  1. Where Active Has Beaten Passive This Year

    After a rough 2011 for active managers, the average active fund has beaten its benchmark in only two categories in 2012. Is the trend here to stay?

  2. Session 3: Best Investment Ideas Roundtable

    A panel of Morningstar equity, mutual fund , and ETF experts detail several individual investment opportunities and sensible investing strategies for income and growth in today's tough market.

  3. Session 2: Midyear Portfolio Checkup and Risk Factor Review

    Director of personal finance Christine Benz will help you check your true exposures and stress-test your holdings in session 2 of Morningstar's 2012 Midyear Financial Checkup.

  4. Grantham Keynote: Investing in a Slower-Growth World

    The GMO chief strategist highlights the factors behind the market's bullish bias, abnormally high corporate earnings, current valuation levels, a slowdown in productivity, and the great paradigm shift in natural resources.

The Top-Performing Funds in 2011's Toughest Category

These two small-value funds have followed different paths to success in a difficult year for the peer group.

Shannon Zimmerman, 12/01/2011

Among Morningstar's diversified domestic-stock fund categories, the small-value peer group has faced the stiffest headwind in 2011. For the year to date through Nov. 28, the category's typical entrant has shed 10.3% of its value.

That nosedive owes in part to the flight to safety that's marked the second half of 2011. According to Morningstar's estimates, more than $53.4 billion has been yanked from U.S. stock funds in the year to date through Oct. 31, with the bulk of outflows coming since June. And with equity investors seeking at least relative stability amid persistent economic uncertainty, the average funds in our large-cap categories have handily surpassed small-cap offerings across the valuation spectrum.

Still, while the small-growth and small-blend groups have suffered in relative and absolute terms this year, those categories' average returns have so far bested the small-value norm. Even within that beaten-down peer group, though, there is a handful of year-to-date winners, including a pair of funds that have followed widely different paths to modest year-to-date gains.

Here's a look at how they've done--and at how they've done it.

ASTON/River Road Independent Value ARIVX
Year-to-Date Total Return Through Nov. 28, 2011: 6.5%
+/- Category: 16
Year-to-Date % Rank in Category: 1

This fund opened for business on New Year's Eve 2010, but its manager, Eric Cinnamond, is an industry veteran with nearly two decades of experience to his credit.

Prior to joining Louisville boutique River Road Asset Management, Cinnamond worked for roughly a dozen years at another small firm, Intrepid Capital Management. At Intrepid, Cinnamond assembled a solid track record at the shop's small-value offering, Intrepid Small Cap ICMAX, which he managed from October 2005 through early September 2010.

Cinnamond's time at the helm of that fund was marked by solid performance and frequent moves into cash. That's also been the case during the early going at the manager's current charge. At the close of October, roughly 45% of the fund's assets were parked in cash. Yet Cinnamond's success doesn't owe merely to timely moves into and out of equities. The manager's preference for financially sturdy firms with ample free cash flow and little debt has also buoyed performance.

Shannon Zimmerman is an associate director of fund analysis at Morningstar.
Upcoming Events

©2014 Morningstar Advisor. All right reserved.