3 Good Funds That Just Reopened
Our manager research team shares some ideas.
|Editor’s note: Read the latest on how the coronavirus is rattling the markets and what investors can do to navigate it.|
Hi, I'm Susan Dziubinski for Morningstar.com. There has been a small silver lining to the turbulence we've been experiencing in the stock market. Several really good funds that were once closed have since reopened. Today, we're looking at three such funds that are now accepting new money.
Kevin McDevitt: Artisan International Value recently reopened to investors for the first time since 2011, and the recent market volatility certainly played a role in the fund reopening. Suddenly, the fund has more capacity than it had in the past. One thing that's been kind of disappointing, though--although this fund has a great long-term record, it didn't do very well or hasn't done very well in this recent market turmoil. It lagged the index by about 4 or so percentage points peak to trough, but that's very unusual for this fund. Over its long history going back to 2002, typically the fund has outperformed during market turmoil such as this. If you look historically, the fund has typically captured about 76% of the MSCI EFEA Index' losses, so most of that outperformance over the long term has come from its relatively strong performance in down markets. So my point being, what happened in this recent market turmoil was more of an anomaly, historically speaking, than anything else. So for those looking for a fund--a value-oriented fund with a little bit of a quality bent as well, then Artisan International value may be worth checking out, especially given that it just reopened for the first time in nine years.
Eric Schultz: Fidelity Small Cap Discovery has had a tough year so far, but its strengths remain intact. When the Russell 2000 Index fell 41% from its March 16 peak to March 18 trough, this fund fell nearly 47%, putting it in the bottom quartile of its small-blend category. Manager Derek Janssen's approach focuses on strong businesses whose valuations reflect a margin of safety. The approach delivered consistent downside protection here and on his previous charge, Fidelity Small Cap Value, but not recently due to several factors. First, the portfolio straddles the line between small value and small blend, whereas the index straddles small blend and small growth. This value tilt was a headwind as Russell 2000 and Russell 2000 Growth both outperformed their value counterpart during the correction. The portfolio also suffered the one-two punch of large exposures to energy and businesses hit hard by coronavirus lockdowns. Heading into the correction, the energy weighting was nearly twice that of the index, and it was the leading detractor during the correction. Large positions in corona-sensitive businesses also took their toll. Nevertheless, the strategy has its merits. The solid approach looking for strong businesses remains intact and is evident in the greater number of holdings with economic moats versus most category peers and the index. Its assets shrunk in the sell-off. The strategy, which has been closed to new investors since 2013, reopened on April 1. It maintains its Morningstar Analyst Rating of Silver.
Nick Watson: Gold-rated Wasatch Small Cap Growth recently reopened to new investors after being closed since 2012. This is a strategy that we have a lot of confidence in. Lead manager J.B. Taylor has a proven track record at the firm. He's been there for nearly two decades. Given his experience and long track record, it's still not a star manager strategy. A big part of the appeal here is Wasatch's collaborative culture and team-managed approach. So, Taylor works very closely with a team of comanagers and analysts on this strategy. They look for well-run profitable firms that have exceptional earnings growth potential. Small-cap growth can be a volatile market segment. But we think that the thoroughness and the consistency of their approach in vetting names as a team has helped smooth the ride over the long term here and also provides some meaningful protection in down markets. So overall, it's a really solid option and one of the best around for small-cap growth exposure.
Susan Dziubinski does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.