Its cost isn't appealing, but its other attributes are impressive.
Morningstar's fund analysts often write about the biggest and most well-known funds and fund companies. We know that a great many of you invest in these giants, or follow them with interest even if you don't own them personally. However, you've also made it clear that from time to time you'd like us to shine some light on lesser-known opportunities, whether established and successful or young and promising.
Here's one such offering (and its cousin). Although Polaris Global Value
Polaris Global Value
This fund is the flagship offering from Boston-based Polaris Capital Management, an 18-year-old firm founded and still led by Bernard Horn. The firm had more than $5 billion under management at the end of 2012, but the only mutual fund it offers to U.S. investors, Polaris Global Value, currently has just $200 million or so in its coffers. The firm does subadvise a fund with about $950 million in assets, Pear Tree Polaris Foreign Value
A look at Polaris Global Value's record may leave readers wondering why it hasn't attracted more attention. Through Aug. 1, 2013, the fund lands in the top half of the world-stock category over every standard trailing period from one year to 15 years. For most of these periods, the fund lands high in the rankings: Over the five-year stretch, it has beaten 90% of its category peers, and over the 15-year period it has beaten about three fourths of them. So far this year, Polaris Global Value is nearly 8 percentage points ahead of the category average.
The fund takes an all-cap approach, which is unusual for a world-stock offering. It currently has at least 10% of assets in each of Morningstar's five market-cap tiers, from giant to micro. In part, that makeup explains its impressive record. Most funds in the world-stock category concentrate on big companies, so this one benefited from its relatively hefty stakes in mid- and small caps during an era when such fare usually outperformed. As a result, Polaris Global Value's rankings aren't quite as impressive when compared only with the subgroup of world-stock funds with market caps under $10 billion. But even there, for the most part it lags only those with much smaller market caps than its $6 billion--true small-cap funds, which have received an even stronger tailwind from the market-cap effect that it has.
The subadvised Pear Tree Polaris Foreign Value (whose portfolio is basically Polaris Global Value with the U.S. stocks stripped out) has posted even better results in the foreign large-value category. All of its returns for the three-year period and beyond, including 15 years, top at least 90% of its rivals. True, it too benefited from its all-cap strategy, but the results are impressive nonetheless.
Horn has been lead manager on both funds for their entire histories, so he's primarily responsible for those fine records. He has about 30 years of investment experience and works with a team of four research analysts, two of whom are listed as assistant managers.
Not What You're Looking For
With such noteworthy records, why don't these funds have more assets? Three reasons are most likely. One, it's simply hard for any fund to get noticed in a very crowded mutual fund landscape, especially those without the backing of major industry players and their generous marketing budgets. Second, the Polaris funds have higher-than-average expense ratios even when compared with actively managed peers. That can't help in an era when more and more advisors and individuals put a high priority on costs when making their purchase decisions.