These funds haven't found a following among individual investors, but the big guys are beating down their doors.
Institutional investors sometimes pick up on a good management team before
individual investors do. When you see a fund close at a surprisingly low asset
base, it might be because it received 3 times that amount from institutional
investors via separate accounts.
As John Rekenthaler pointed
out, institutional investors make their share of mistakes, too, but you can
still get some good ideas from them. They get to know fund management teams and
their processes. As a result, they may be willing to move quickly into a new
fund because they already know the managers and their strategies from other
funds or fund companies. Or it may simply be the case that a fund management
team makes its name in separate accounts first and therefore is better known to
institutions than individuals.
In any case, there are good funds out there that have largely been off
individual investors' radar screens even as institutional investors are piling
in. In some cases, those institutional investors appear to be on to
Laudus Growth Investors US Large Cap Growth LGILX has just $1 billion in assets
despite a truly impressive record. Laudus is Schwab's brand name for subadvised
funds; in this case, UBS is the subadvisor. Understandably, neither Schwab nor
UBS is a name that inspires visions of great fund management, but each should in
this case. Lawrence Kemp and his team at UBS have been an oasis of stability and
strong performance. As a result, they are now running nearly $13 billion in this
strategy. They manage a focused portfolio of growth stocks without producing
excessive volatility. Check out the fund's record since Kemp took the helm in
2002. We rate this hidden gem Bronze.
Artisan Global Value ARTGX is a
small slice of a $4.7 billion strategy. Institutions have been attracted to
David Samra and Dan O'Keefe's blueprint. They've done a brilliant job at Artisan International Value ARTKX,
and it's not hard to see why their approach would work with U.S. stocks. They
look for cheap companies with strong balance sheets, and they are quite
selective, as evidenced by their compact portfolios. Yet Artisan Global Value
has a mere $148 million in assets. Perhaps investors will gravitate toward the
fund when it hits its five-year mark in December, as it has outperformed in each
of its four calendar years so far. On the other hand, that may be too late. They
closed their international value strategy a couple of years ago, and they may be
approaching capacity in this fund, too.
With a name like Manning & Napier Pro-Blend Moderate Term EXBAX, this fund clearly isn't run by marketing folks.
Manning & Napier runs about $40 billion but has only recently garnered
individual investors' attention. The firm has a team of managers that runs all
of its funds. It begins by adjusting the fund's asset allocation based on its
forecasts and then uses a bottom-up approach to pick stocks and bonds. The firm
does a nice job of aligning shareholder interests with its own. For example, an
analyst won't receive a bonus if his recommendations are losing money over
certain rolling periods, even if the fund has beaten its benchmark.
Western Asset Core Bond WATFX is a
$2 billion fund at a management firm with $443 billion in assets. Western runs
quite a lot of money for pension funds and routinely competes with PIMCO and
BlackRock for business, yet it hasn't received much attention from individual
investors. The fund got singed by the 2008 credit debacle as it had more
low-quality credits than most of its peers. We feel as though the managers have
righted the ship since then, and we rate the fund Silver.