Skip to Content
Fund Spy: Morningstar Medalist Edition

A Fistful of Downgrades

We lowered the boom on five funds.

Mentioned: , , , , , ,

We have lowered our rating on five funds.

We took  Arbitrage Fund (ARBFX) down a peg to Bronze from Silver because of strategy and management changes. We still think it's a good choice as indicated by the Bronze rating, but there are some concerns. The fund had a growth spurt to $3 billion from $500 million in just three years, and it gave the fund a different profile. Management has moved toward large caps in order to find more liquidity. As a result, it has gone to just 13% small-cap exposure from 40%. As small caps were big contributors to the fund's success, that's a worry.

Russel Kinnel has a position in the following securities mentioned above: FFRHX. Find out about Morningstar’s editorial policies.