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Morningstar Managers of the Year

10 Questions with Bill Frels, Mark Henneman, Rajiv Jain, Mark Kiesel, Eric Newman, and David Giroux.

Morningstar Advisor, 02/11/2013

This article originally appeared in the February/March 2013 issue of MorningstarAdvisor magazine. To subscribe, please call 1-800-384-4000.

Domestic Equity: Bill Frels and Mark Henneman, Mairs & Power Growth MPGFX

1 You and many of your largest holdings are based in Minnesota. That’s worked well for you?
We benefit from the fact that there are a lot of well-managed, growth-oriented companies in or around the Twin Cities. We’ve got a lot of raw material to work with.

2 Why is proximity important to you?
Getting to know management and their strategies and how they are planning to achieve their objectives is critical, at least in our minds, to making good long-term investment decisions.


International Equity: Rajiv Jain, Virtus Foreign Opportunities JVIAX, Virtus Emerging Markets Opportunities HEMZX

3 Your funds have more India exposure than most peers and less China. Why?
It’s a function of what companies are being offered. You can get ITC, which is a tobacco monopoly in India, and Hindustan Unilever, which has been around for 120-odd years and has done well. You cannot find any companies of that nature in China.

4 What is the investment story in India?
In India, we feel there is a big, long-term consumption story that is not well appreciated. 


Fixed Income: Mark Kiesel, PIMCO Investment Grade Corporate Bond PBDAX

5 What were the keys to your success in 2012?
It’s a combination of riding through the storm with the banks as well as embracing the housing recovery and energy revolution maybe earlier than some other managers.

6 After a great year in 2012, is the value now gone from the corporate-bond market?
People are still going to embrace the global credit markets. I think you are going to have to be more selective. You’re going to have to find what we call diamonds in the rough. And our strategy is to focus on the faster growth areas. We still think the global credit markets have significant opportunity.


Alternatives: Eric Newman and team, TFS Market Neutral TFSMX

7 Could you briefly describe the fund’s strategy?
It is a quantitative fund. We maintain a constant ratio of longs and shorts in the equity piece. What that means is that we’re not trying to make money by timing the market. We’re trying to make money on the spreads between those longs and shorts.

8 Why does the fund concentrate on small caps?
It’s not because we’re experts in small caps, but that’s where we find the alpha, that’s where we find the inefficiencies in the market.


Allocation: David Giroux, T. Rowe Price Capital Appreciation PRWCX

9 What went well for you in 2012?
A lot of our floating-rate instruments did well. We had a big bet in Sprint in our fixed-income that did well. TRW TRW, Delphi DLPH, some of our auto suppliers did well. Disney DIS had a good year. Thermo Fisher TMO, which was our largest holding, did very well.

10 Your equity portfolio is around its historical weighting. The bond portfolio is below average, but that’s not an indication that you’re bullish on stocks, correct?
Yes. Equities are attractive on a relative basis—because bonds are unattractive. Stocks on an absolute sense are not a compelling value right here.

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