4 Funds Whose 10-Year Records Really Are the Whole Story

The article was published in the October 2014 issue of Morningstar FundInvestor. Download a complimentary copy of FundInvestorhere.

One of the first things I look at in a fund is its record over the run of its longest-tenured manager. I want to know whether the fund outperformed over that entire stretch and I want to see how it fared in different environments over that period.

Unfortunately, we can’t produce endless returns tables to capture all the tenure dates of managers. As it happens, though, there are some funds that conveniently have manager tenures of just over 10 years, so we can learn quite a lot from that standard 10-year return. Let’s look at four Morningstar Medalists and their 10-year records through the end of November 2014.

Bronze-rated  Janus High-Yield (JAHYX) manager Gibson Smith has been at the helm since December 2003, and he was joined by comanager Darrell Watters in 2008. Over the trailing 10 years, the fund has gained 7.2% annualized, beating 70% of its peers. The fund is not afraid of credit risk, but its 19.3% loss in 2008 was 7 percentage points better than its average peer's. The fund’s 2009 returns lagged a bit, but that’s a comforting profile for a high-yield fund, especially now that we are more than five years out from the last meltdown: Credit meltdowns tend to hit every seven to 10 years. The fund doesn’t always run to the cautious side. Rather, Smith and Watters try to dial down risk at the right time. They did it in 2008, but of course there are no guarantees that they’ll get it right next time.

Three of  Becker Value Equity’s (BVEFX) nine-member team have start dates going back to November 2003, so its 10-year record is telling. The Bronze-rated fund’s 9.0% annualized return tops 95% of peers’ over the past 10 years. Although it lost less than most peers in 2008, the fund is more moderate-risk than low-risk. The fund doesn’t always outperform in down markets. Management looks for strong metrics like return on invested capital as well as good managers before buying. A bias against financials helped in 2008.

Silver-rated  American Century Mid Cap Value (ACLAX) has a trio of managers who started in March 2004: lead managers Phil Davidson and Michael Liss along with comanager Kevin Toney. They’ve built quite a record, as the fund’s 10.7% annualized 10-year return tops 95% of peers’ through November 2014. Their greatest times of outperformance tend to come in years like 2008 when the market is hammered, and they tend to lag in big rally years like 2013. They do that by avoiding the extremes of deep value--paying more for companies that have healthy financials--while also selling on rallies to limit price risk. It’s closed to new investors but certainly worth owning if you have it.

 Oppenheimer Global (OPPAX) manager Rajeev Bhaman was named comanager in August 2004 and became lead in October 2005. The fund has produced 7.5% annualized returns over the past 10 years to top a majority of its peers. Bhaman’s growth-at-a-reasonable-price strategy has led to a middling risk profile. You can see that from the portfolio’s names. Steady bets like McGraw Hill (MHFI) and  SAP (SAP) counter high-risk emerging-markets names like the Moscow Stock Exchange and ICICI Bank of India. Through up and down markets, Bhaman has had enough success to make this a Silver-rated fund. 

 

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