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By Christine Benz and Russel Kinnel | 08-15-2013 02:00 PM

Are These Funds Worth the Hype?

Director of fund research Russ Kinnel explains how Morningstar analysts rate some of the fund world's biggest recent asset gatherers (and losers).

Christine Benz: Hi I'm Christine Benz for Morningstar.com.

What do Morningstar's fund analysts think of the fund world's biggest asset gatherers and losers?

Joining me to discuss that question is Russ Kinnel, director of fund research for Morningstar.

Russ, thank you so much for joining me.

Russell Kinnel: Good to be here.

Benz: Russ, let's talk about the fund world's biggest asset gatherers year-to-date. You took a look at some of the funds that have been garnering the biggest investor inflows. At the top of the list is PIMCO Unconstrained Bond. I know that initially, we are lukewarm or not sure what to make of this non-traditional bond category. The fund has been around for a little while now. What kind of rating does that particular fund garner currently?

Kinnel: We give it a Bronze. It's a really interesting strategy. They have more leeway to go up and down in duration--they can even go negative duration, which means they're betting that rates will rise. So it's got more flexibility. With interest rates rising lately, that has a lot of appeal. But it still hasn't really proven itself through a full cycle, so Bronze, not Gold. We want to see it prove a little more, but we do think there are some good people in place there.

Benz: Within that non-traditional bond category, are there any funds that we rate as really high-conviction at this point in time?

Kinnel: Yes. FPA New Income, we give a Silver to.

Benz: That's been around a long time.

Kinnel: Right. Very proven. It's not as wild as some of the non-traditional bond funds, because they're not going to short duration. It's just a very cautious fund, run with the idea of preserving capital, not losing much, and when available, they'll go for yield and income, but generally it's all about defense.

Benz: Mentioning those two funds together, it really showcases that that category is a broad basket; you've got a lot of different strategies. You probably want to know what you own before you buy it.

Another fund that you noted has really been doing quite well in terms of gathering new investor dollars is a fund that we've known for a long time: Oakmark International. Where do we have that fund in terms of its current rating?

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