Morningstar Fund Analysts' Best Ideas

This analyst blog is part of our coverage of the 2015 Morningstar Investment Conference.

When you think about the current environment of very low yields, add in the potential for rising rates and the liquidity issues that may result from those interest-rate shocks, and then you combine that with the fact that market valuations overall are far from cheap, it would be hard to imagine an environment more challenging for investors, Morningstar director of personal finance Christine Benz said as she introduced the "Fund Analysts' Best Ideas" discussion on day 3 of the 2015 Morningstar Investment Conference.

The high-conviction investment ideas presented by the panel were tailored to address each of those concerns and challenges.

Morningstar senior analyst Karin Anderson, who focuses on fixed-income funds, began the discussion by giving a quick overview of the five pillars Morningstar focuses on to rate funds: people, process, parent, performance, and price. (For a more detailed discussion of the pillars, click here.)

The first set of ideas focused on earning income without taking on undue risk. The discussion started with cash alternatives, which earn a little more yield than cash, but don't take on too much risk. Sumit Desai, a fund analyst who also focuses on fixed income, likes Bronze-rated

Another pick Desai likes in this space is Silver-rated

Anderson then steered the discussion to Morningstar analysts' highest-conviction picks in the core fixed-income space. Top picks

Anderson points out that many funds in this category, specifically Met West Total Return Bond and Dodge & Cox Income, have received big inflows in the wake of Bill Gross' departure from PIMCO and subsequent outflows from

Morningstar analysts also recommended core muni funds

Stepping out on the risk spectrum a bit, Anderson outlined some favorites in the noncore fixed-income space that could be used as supporting players or choices to diversify a fixed-income portfolio.

Turning to equity funds, Morningstar senior analyst Kevin McDevitt outlined some issues investors should be aware of when it comes to funds that focus on dividend-paying stocks. He separates the universe of equity-income funds into two types--funds that focus exclusively on companies that pay out high dividends in absolute terms, and those that focus on "dividend growers." The difference is important, McDevitt said, because sometimes quality is sacrificed in the stretch for yield. Companies that are focused on growing dividends tend to be higher quality, and the funds that invest in them to tend to be more conservative. Funds that focus on stocks with higher yields, by contrast, tend to carry an additional amount of risk. This could be due to the fact that the companies are more interest-rate-sensitive, and it could also be due to the fact that payout ratios tend to be higher, McDevitt said.

Among the equity-income funds that Morningstar analysts recommend are

Morningstar senior fund analyst Greg Carlson then turned the discussion to finding equity funds that may still have some upside after the extended market rally. In particular, Carlson likes

Among non-U.S. equity strategies, Morningstar analysts have high conviction in