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Fund Spy: Morningstar Medalist Edition

8 Upgrades, 6 Downgrades in May

Overall, we published 161 ratings and rated nine new strategies.

In May, Morningstar manager research analysts affirmed the Morningstar Analyst Ratings of 130 funds, one target-date series, and three separate accounts; upgraded the ratings of eight funds; downgraded the ratings of six funds; placed four funds’ ratings under review; and assigned new ratings to seven funds, one separate account, and one model portfolio. 

JPMorgan Equity Income 
Strong execution of a solid strategy raised  JPMorgan Equity Income's (HLIEX) rating to Gold from Silver. Manager Clare Hart focuses on companies with at least 2% dividend yields while paying attention to future earnings growth. The portfolio mostly owns durable franchises with high returns on capital, so its income doesn’t usually top its peers. However, it has made up for the lower yield with total returns. Hart also doesn’t take much price risk, buoying the fund in turbulent markets. Reasonable expenses add to its appeal. 

Principal Small-MidCap Dividend Income
 Principal Small-MidCap Dividend Income (PMDIX) is a compelling, reopened strategy in a capacity-constrained asset class. The managers and analysts use a standardized process to deliberately and methodically look for dividend-payers. They stick with winners for a long time and make their biggest bets on individual stocks, not sector allocations. They take a long-term approach with their picks and their business, recently promoting team veterans to comanagers. The fund has held its own against the Russell 2500 Value Index and dividend-focused peers, earning a rating upgrade to Silver from Bronze. 

Fidelity Advisor Growth Opportunities 
A risky profile shouldn’t deter investors from  Fidelity Advisor Growth Opportunities (FAGOX). The fund tends to hold more rapidly growing and pricey stocks than the typical large-growth Morningstar Category peer. But manager Kyle Weaver has a knack for spotting high-potential opportunities that are off the beaten path of most large-growth portfolio managers. He’s also skilled at pruning positions during times of market euphoria and rebuilding them during moments of panic. Although Weaver’s tenure on this diversified fund only dates to 2015, he has a large cast of Fidelity analysts at his disposal. Since taking over here, Weaver has delivered eye-popping results. This fund is worth a look, so its rating rises to Bronze from Neutral. 

PGIM Short-Term Corporate Bond
 PGIM Short-Term Corporate Bond (PBSMX) prepared well for an upcoming manager transition, but its expenses have become less appealing. Longtime manager Malcolm Dalrymple will retire in August 2019, but David Del Vecchio, comanager here since 2012, and Steven Kellner, who has overseen the firm’s credit funds since 1999, remain in place. The firm also added Matthew Csontos when Dalrymple announced his retirement. The strategy’s significant analytical resources are also intact, as is a consistent approach that tends to be a bit more volatile than most short-term bond rivals. The fund’s cost, however, has become less appealing as more funds compete on price, dropping its rating to Bronze from Silver. 

PIMCO All Asset
 PIMCO All Asset’s (PAAIX) aggression cost it its Gold rating, which has dropped to Silver. Research Affiliates, the strategy’s subadvisor, forecasts long-term returns of asset classes and buys PIMCO funds representing those that look the cheapest. The strategy places few constraints on asset-class weightings, so it has had large exposure to some asset classes in prolonged slumps, such as emerging-markets equities and debt. The contrarian approach can make the fund difficult to hold for the long term, and has dented its recent performance. That said, capable management at Research Affiliates and PIMCO; the fund’s systematic process; and its attractive fees still make it a good portfolio diversifier for patient investors. 

New Ratings
GQG Partners Emerging Markets Equity
GQG Partners Emerging Markets Equity’s (GQGRX) young age belies the experience at its helm. Before manager Rajiv Jain founded the strategy and its parent firm in 2016, he achieved long-term successes at his former employer Vontobel, most notably with  Virtus Vontobel Emerging Markets Opportunities (HIEMX) and  Virtus Vontobel Foreign Opportunities (JVXIX). Here Jain continues to strike a balance between patience and opportunism while looking for financially sound companies with a history of weathering volatile economies. He usually holds stocks for many years, but he can be quick to transform major portions of the portfolio if he deems it appropriate. That tactic has fueled the fund’s enviable showings in recent down markets. A below-average price tag also helps. The fund earns an inaugural Silver rating.


Shannon Yan does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.