Funds With Newer Managers Can Still Earn Medals

It's more comforting if a fund has a manager with a long track record. But even funds run by managers with shorter tenures can be Morningstar Medalists if they engender sufficient confidence in their long-term prospects. This typically occurs when the managers have had success elsewhere and are using the same approach at a new, reasonably priced fund offered by a decent parent company. Here are a few equity funds fitting that description.

 BlackRock Basic Value (MABAX) | Analyst Rating: Bronze
While Carrie King has been a named comanager on this large-value fund for nearly five years, Bart Geer--who joined the fund in October 2012--serves as the lead here. Geer brought his relative value strategy, which relies on a mix of fundamental research and quantitative screens, to this fund from a successful 12-year stint at Putnam Equity Income (PEYAX). From December 2000 through August 2012, the Putnam fund surpassed 74% of its peers as well as the Russell 1000 Value Index.

Geer's working with a different investment team, but he also has BlackRock's wealth of resources, including the firm's vaunted risk tools and quant expertise, at his disposal. He's off to a fine start. In his first nearly two years at the helm, the fund outpaced 84% of peers, as well as the Russell benchmark, through Sept. 23, 2014.

 Meridian Growth (MERDX) | Analyst Rating: Bronze
This mid-growth fund's future was uncertain after Rick Aster, the lead manager since its 1984 inception, passed away in early 2012. Other investors from his team then oversaw the portfolio, but most had other funds to manage as well and Aster's eponymous firm was left rudderless. In 2013, Arrowpoint Partners (founded by three former Janus portfolio managers in 2007) agreed to purchase Aster's firm and take over the fund. Arrowpoint hired Chad Meade and Brian Schaub, who amassed a superb seven-year record at  Janus Triton (JATTX), away from Janus to run the Meridian fund. They took over in September 2013 following a shareholder vote.

Meade and Schaub's early returns here are subpar; the fund trails both its typical peer and the Russell 2500 Growth Index (a mix of small- and mid-cap stocks that also served as the benchmark for Janus Triton) by 3 and 2 percentage points, respectively. But they've demonstrated an ability to pick winners among both rapid growers and more-stable fare over the longer haul. A six-person analyst team that includes several former Janus colleagues supports them, and they are working with a smaller asset base than they had in their last two years at Triton. They also intend to close the fund at a significantly lower level of assets than Triton reached by the time they left Janus, which should mean greater flexibility.

 BlackRock Capital Appreciation (MDFGX) | Analyst Rating: Bronze
This previously mediocre fund was taken over at the start of 2013 by Lawrence Kemp, who joined the firm after 20 years at UBS. While at UBS, Kemp steered  Laudus US Large Cap Growth (LGILX) past 90% of its peers and the Russell 1000 Growth Index from January 2002 to November 2012. Kemp is off to a slow start at his new charge; it's trailed more than three fourths of its peers and the Russell index. But there's plenty of reason for optimism: Kemp's strategy of diversifying among faster-growing fare, steady-Eddie firms, and more-cyclical growth has produced solid results in the past. The six-person team he has built at BlackRock also includes three former members of his UBS squad. Finally, in a vote of confidence, Charles Schwab, the advisor to Kemp's Laudus fund, hired Kemp as the subadvisor to the fund just one year after he left UBS.

 Fidelity Advisor Capital Development (FDTTX) | Analyst Rating: Silver
Matt Fruhan took the helm in December 2013, but he's been using the same strategy at other large-cap equity funds at the same firm since 2005. In Fruhan's nine-year tenure at  Fidelity Large Cap Stock (FLCSX), that fund has beaten 97% of its large-blend peers and is well ahead of its S&P 500 benchmark. And he's since remade this fund--previously a streaky, volatile large-growth offering--into a clone of Large Cap Stock (the portfolios overlap by more than 97% of assets). Fruhan has been willing to own plenty of economically sensitive firms at times, which has juiced volatility (witness Large Cap Stock's poor absolute and relative performance in 2008). But strong stock selection on the upside has more than made up for the rough periods, and that fund has beaten 88% of peers and the index on a risk-adjusted basis.

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