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Fund Spy

Good Funds With Bad Pedigrees

Sometimes even bad parents can produce worthwhile offspring.

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We recently delved into the attributes of fund companies that earn either the best or worst Parent ratings. Morningstar's director of active fund research, Michael Herbst, counted himself among those investors who won't consider an offering from a Negative-rated parent, regardless of the fund's particular qualities.

That's understandable. If a fund is backed by a company that does not control costs or cannot retain top management, that fund may inevitably lose its edge, no matter how good it is today. As we demonstrated in a follow-up column, the factors that lead to a Positive Parent rating are also linked to superior fund performance.

Laura Lallos has a position in the following securities mentioned above: VTI. Find out about Morningstar’s editorial policies.