7 Funds That Are Better Than They Look
Short-term challenges aside, several of Artisan's open funds are promising long-term ideas.
Nearly half of Artisan’s funds are closed to new investors, the short-term performance of the overall lineup has been unremarkable, and fees are generally above average. Yet the firm does offer some open, proven options as well as a few younger and intriguing funds.
Since opening in 1994, Artisan’s modus operandi has largely remained unchanged. It hires successful or up-and-coming investors and generally allows them the freedom to set up their teams as they see fit. Each of the now-seven teams builds distinctive portfolios, and the firm is sensitive to capacity: Seven of the 15 funds are closed to new investors, and two others have closed in the past.
Four of the five teams with long histories have generally been successful over the long haul. (The exception is the team that manages Artisan Emerging Markets (APHEX), which has turned in mediocre results since its June 2006 inception.) The median category rank of the eight Artisan funds with 10-year records through May 4, 2016, is 23 (just inside the top quartile).
Here are the firm’s most-promising open funds, all of which have less than $2 billion in assets.
Artisan Global Value (ARTGX)
This fund, with a Morningstar Analyst Rating of Silver, reopened to new investors in October 2015 after closing two years earlier. It is managed by Dan O’Keefe and David Samra, who also run Gold-rated Artisan International Value (ARTKX) (which remains closed) and have twice won Morningstar’s International-Stock Fund Manager of the Year award. They typically seek undervalued firms that are still in good financial shape, though they will buy dicier fare if the discount is deep enough. They run compact portfolios of 40-50 stocks, and their two charges have held up quite well in downturns and generated strong absolute and risk-adjusted returns. Artisan Global Value reopened when the managers found more opportunities following 2015’s third-quarter downturn. The managers likely won’t leave the fund open long if inflows pick up again--while it is fairly small at $1.7 billion in assets, they run another $12.5 billion in the strategy outside of the fund. Thus, it is unlikely that asset growth will be substantial enough to drive the fund’s above-average expense ratio down much.
Artisan Global Opportunities (ARTRX)
This fund also earns a Silver. It was launched as a large-growth fund in 2008, but non-U.S. stocks were gradually added to the portfolio, and it moved to the world-stock Morningstar Category in 2012. It is managed by the same team behind Artisan Mid Cap (ARTMX) and Artisan Small Cap (ARTSX), which are both closed and also earn Silver ratings. Although its geographic focus has broadened, Artisan Global Opportunities remains a straight-ahead growth fund with significant stakes in tech and healthcare stocks. Its above-average weighting in U.S. stocks, even after the category change, has often been a tailwind since then. But lead manager Jim Hamel (a member of the team since its oldest charge, Artisan Mid Cap, launched in 1997) and company have demonstrated strong stock-selection skills over time, and a well-diversified approach has allowed the fund to post above-average returns in rallies without falling behind much in downturns. The team runs $7.7 billion in the large-cap-heavy strategy, so plenty of capacity remains.
Artisan Value (ARTLX)
This large-value fund hasn’t fully delivered on its potential. It is managed by the team that has steered Silver-rated Artisan Mid Cap Value (ARTQX) to strong long-term returns, but Artisan Value has merely edged out its typical peer while lagging the Russell 1000 Value Index since its 2006 inception. (The team also runs Artisan Small Cap Value (ARTVX), which previously had an excellent record but has struggled mightily in recent years and is set to merge into Artisan Mid Cap Value this month.) Nevertheless, this concentrated 30-40 stock portfolio still holds promise because of its focus on cheap fare with relatively sturdy balance sheets and the presence of veteran skippers George Sertl (the lead) and Jim Kieffer. (Team founder and comanager Scott Satterwhite will retire in October.) It earns a Bronze rating.
Artisan Global Equity (ARTHX)
This fund hasn’t been rated yet, but it is managed by the same Mark Yockey-led team behind Gold-rated Artisan International Small Cap (ARTJX) and Silver-rated Artisan International (ARTIX) (which are both closed), as well as Artisan Global Small Cap (ARTWX). This fund has struggled in early 2016 (as have Yockey’s other charges), thus marring its three-year record, but it has posted excellent returns since its March 2010 inception. Yockey and team are growth investors who tend to pursue a mix of rapid growers, slower-growing blue chips, and a smattering of turnaround plays, and regional and country weightings are a fallout of stock selection. While the early 2013 departure of comanager Barry Dargan was a loss, Yockey’s record in his 20-year tenure at Artisan is superb, and he’s still backed by a deep, veteran crew. The team runs just $900 million in this strategy.
Artisan Global Small Cap (ARTWX
)The youngest of Yockey’s charges launched in June 2013, so its record, while poor, is quite short. This small fund’s 1.5% expense ratio represents a significant hurdle, but the team has done quite well with small caps over the long haul at the similarly priced Artisan International Small Cap.
Artisan High Income (ARTFX)
For its first fixed-income fund, launched in early 2014, the firm hired Bryan Krug, manager of Ivy High Income (WHIAX) from 2006-13. His approach is fairly bold, with significant bets on individual securities and a preference for lower-rated bonds and second-lien bank loans. But Krug navigated the credit crisis of 2007-08 quite well at the Ivy fund, and its 9% annualized return during his full tenure ranked fourth out of 110 distinct high-yield-bond category peers. He’s off to a strong start here, too.
Artisan Developing World (ARTYX)
Hired by Artisan last year, manager Lewis Kaufman plies a similar approach here to the one he used at Thornburg Developing World (THDAX). He invests in stocks in emerging markets but also owns companies in developed markets that derive a significant portion of their profits from those less-developed markets, and he builds a fairly compact portfolio (the fund recently held 48 stocks). This fund is less than a year old, but Kaufman generated solid total- and risk-adjusted results during his 5.5-year tenure at the Thornburg fund.
Greg Carlson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.