6 Funds That Shouldn't Be in Outflows

Look at the best-selling funds and you'll see that many are great choices. There are lots of low-cost, well-run funds--both active and passive--among them.

But when I look at the most-redeemed funds, I see some keepers. It's natural that some good funds will hit a rough patch and spur people to leave. But look closer and you'll see some appealing traits. Let's take a look at six of the most-redeemed Morningstar Medalists.

Harbor International HAINX

It's no surprise that this fund is getting redeemed. Returns have stunk, and Harbor changed managers. The fund shed $18 billion for the 12 months ended January 2019. Under previous subadvisor Northern Cross, the fund had produced six consecutive years of poor performance before Harbor pulled the trigger and hired Marathon Asset Management to right the ship. And that's why the fund might be a decent bet going forward. It spat out a big capital gains distribution in December, so the pain may be in the past. Marathon uses a team approach and has produced strong results for a number of years. We give the fund a Morningstar Analyst Rating of Bronze.

Fidelity Total Bond FTBFX

This fund makes the list because of a conversion to a similar Fidelity Strategic Advisors fund. That explains why a fund like this would get $12 billion in redemptions. Most years its returns are pretty placid. It has decent single-digit gains that are not too far from the benchmark. Relative to the Bloomberg Barclays U.S. Aggregate Bond Index, it keeps interest-rate risk even and runs a little more credit risk. The rest of the value-add should come from issue selection. We rate the fund Gold because Ford O'Neil and team are focusing on making a difference in areas that are in their wheelhouse.

Metropolitan West Total Return Bond MWTRX

Yes, it's another Gold-rated intermediate-term bond fund that has become unpopular. In this case, I think it's a subpar three-record that has driven $11 billion out of the fund. The fund has greater latitude than Fidelity Total Bond, and it has used that flexibility to dial down credit and interest-rate risk in recent years. Unfortunately for the fund, those risks have generally paid off, even with rates rising more recently. Thus, the unimpressive recent record. But the fund's long-term record is excellent, and the strong management and analyst group behind it remain in place.

Fidelity Contrafund FCNTX

Do you worry that when your fund is slumping, the manager shrugs it off and dashes to the golf course every Friday? That may be the case with some managers, but Will Danoff really takes slumps to heart. He puts smiley faces on his notebooks and computers to keep from getting too down on himself, and if you talk with him during a slump you can see why. The fund was running about 200 basis points behind the S&P 500 for the 12 months ended February 2019, and it shed about $9 billion in assets under management. Danoff is no stranger to these mini-slumps, and he has always come back strong. He makes maximum use of Fidelity's analysts and company visits to ferret out winners. We rate the fund Silver.

PIMCO Total Return PTTRX

This fund has given investors even less reason to sell. It has top-quartile returns in the past three years. In addition, its management trio led by Scott Mather has really hit its stride. We were so impressed that we raised the fund to Gold in April 2018. The managers have emphasized sector and fundamental research in order to strike a better balance with purely top-down calls. Yet, the fund saw $9 billion go out the door in the past 12 months.

First Eagle Global SGENX

This Bronze-rated fund is all about downside protection, and its strengths once again came to the fore in the winter sell-off. Thus, the fund shrugged off lagging performance in prior periods to put up strong recent performance. I suspect that means outflows will stop or go down to a trickle shortly. The fund shed about $6.4 billion for the 12 months ended January. To own it, you have to appreciate its conservatism and be patient enough for that to help the fund make up ground in a downturn. The fund mixes value stocks, gold bullion, bonds, and cash to come up with a portfolio that usually comes through when you need it most. In 2008, the fund lost 21.4%, less than 90% of its peers.