Our Favorite Equity Funds With Above-Average Fees

My colleague Dan Culloton recently wrote a Fund Spy about low-priced funds that nevertheless didn't earn medals (Morningstar Analyst Ratings of Gold, Silver, or Bronze). In this column, I'll tackle the flip side of that topic--funds that charge above-average fees, yet still earn the highest Analyst Rating of Gold. Studies have shown that low fees are one of the best predictors of long-term outperformance, so only four equity funds that earn a Negative pillar rating for Price make the cut. Those funds generally charge only slightly above-average fees, and one (Artisan International Value) gets docked for charging average fees despite a large asset base.

Furthermore, all four funds earn Positive ratings for each of the other four pillars (People, Process, Parent, and Performance). Each one boasts a lead manager who has successfully applied the same disciplined strategy for more than a dozen years and is backed by a firm that has demonstrated good stewardship. (Two of the funds are closed to new investors to preserve their flexibility.) Let's take a closer look at each one.

Artisan International Small Cap ARTJX

Mark Yockey has served as this foreign small/mid-growth fund's lead skipper since its 2001 inception. (He also manages Silver-rated

This fund closed to new investors less than two years after launching and has stayed closed; that's arguably one of the reasons it has continued to thrive. With a total of $1.3 billion in the strategy (separate accounts using this approach are also closed), Yockey and his team have been able to focus on small-cap names when valuations warrant doing so. They've also been able to keep the portfolio compact at 40-60 holdings and let picks cluster in a few sectors. These traits have made the fund fairly volatile at times, and its expense ratio has stayed around 1.5% (6 basis points above the norm for no-load foreign small-cap funds). But the fund has decisively beaten its typical peer and the MSCI EAFE Small Cap Index over three, five, and 10 years, and Yockey and a deep, experienced support team remain in place.

Artisan International Value ARTKX

Two-time Morningstar International-Stock Managers of the Year David Samra and Dan O'Keefe steer this closed fund (as well as Silver-rated

The fund may be due for a significant dry spell given a remarkable recent run of strong returns, but the presence of Samra and O'Keefe and their patient application of the strategy engender confidence.

Causeway International Value CIVVX

Most of the managers of this foreign large-blend fund have worked together for nearly two decades. Lead skippers Sarah Ketterer and Harry Hartford comanaged a similar fund for Hotchkis & Wiley from 1996 to 2001 before launching their own firm, and comanagers James Doyle, Kevin Durkin, and Jonathan Eng have each worked with Ketterer and Hartford since 1997. The remaining four managers joined the firm between 2003 and 2007.

This veteran team plies a contrarian approach, looking for companies with what it deems to be short-term issues trading at moderate-to-low valuations. As a result, the fund often sports hefty exposure to economically sensitive fare, which has led to significant volatility at times. But risk is moderated to a degree by the fund's focus on large-cap firms in developed markets.

This fund earned a Negative for Price the last time it was rated, though its fees are now more in line with the category norm (its Institutional shares carry a modestly below-average price tag, while the Investor shares are a bit higher than average). Meanwhile, its total and risk-adjusted returns are well ahead those of its typical peer since inception, despite a lack of exposure to emerging markets and small-cap stocks (both have been headwinds at times). And the remarkable continuity at the team is a big plus.

Weitz Partners Value WPVLX

This fund boasts a substantial edge in experience, even in comparison to the other three funds: Wally Weitz is about to hit his 32nd anniversary as manager. He's also built a small but tight-knit crew around him, including comanager Brad Hinton (who joined the firm in 2001 as an analyst and was promoted to comanager in 2006). Hinton focuses on tech stocks, thus complementing Weitz's specialties (media and financials).

The managers buy companies of all sizes and demand a large discount to their estimate of a firm's fair value before they'll buy, and when they can't find enough ideas, they're quite willing to hold cash (which has hit 30% of assets). Between its cash hoard and the emphasis on a few sectors, returns can be quite streaky--the fund is best suited for patient investors. But its record is solid over the long haul, particularly on a risk-adjusted basis. Fees are above average here now--the Investor shares' 1.18% expense ratio is significantly above the 0.94% norm for large-blend funds. However, the fund's all-cap nature (it has resided in the more expensive mid-value category in the past) makes that price tag a little more understandable, and fees have trended down here in the past when the fund has grown larger.

For a list of the open-end funds we cover, click here. For a list of the closed-end funds we cover, click here. For a list of the exchange-traded funds we cover, click here. For information on the Morningstar Analyst Ratings, click here.