Morningstar Awards for Investing Excellence--Outstanding Portfolio Manager Nominees

Today, we announce the 2020 nominees for the Morningstar Awards for Investing Excellence--Outstanding Portfolio Manager. Morningstar analysts nominated five candidates for the award across equity, fixed-income, and multi-asset categories. The winner for the award will be announced in late June 2020.

These five nominees have delivered exceptional long-term investment performance while demonstrating alignment of interests with investors, the courage to differ from the consensus, and clear investment skill. To qualify for a nomination, the nominee must run an investment strategy that earns a Morningstar Analyst Rating of Silver or Gold for at least one vehicle or share class. These nominees have navigated various market cycles successfully over the course of their tenure and remain among the best in their respective asset classes. Lastly, the nominees have all invested meaningfully alongside investors in their respective strategies.

Below we highlight each nominee in more detail.

Charles T. Akre Akre Capital Management Manager Tenure: 11 years

Charles Akre is one of the best investors of his generation. His 23-plus-year record includes nearly 13 years as sole manager of FBR Focus Fund (renamed Hennessy Focus HFCSX in 2012). In August 2009, he left that fund and launched Akre Focus AKREX, where he rebuilt his analyst staff from scratch. Akre posted stellar records at both funds. While he managed FBR Focus from January 1997 through Aug. 22, 2009, the strategy returned 12.5% annualized, making it one of the best performing of all U.S. mutual funds as it migrated from the small-blend to mid-cap growth Morningstar Categories. Meanwhile, Akre Focus’ institutional shares returned 17.1% annualized from September 2009 through May 2020, a gain that topped more than 90% of the large-growth Morningstar Category competition. Today, Akre remains a named manager on the fund, but day-to-day portfolio management duties now fall to John Neff and Chris Cerrone, who will take over when Akre retires.

Akre developed his investment philosophy early in his career while working for the brokerage firm Johnston, Lemon & Co, where he rose to become the CEO of the asset-management division. His style shows the influence of Warren Buffett. He favors businesses that are sturdy and can grow capital over long periods, so-called "three-legged stools." The first leg is a business model that produces high free cash flow and has sustainable competitive advantages. The second leg is strong shareholder-oriented management, and the third is the ability to reinvest cash at a superior rate of return. While valuations play an important role at the time of purchase, Akre usually won't sell based on valuations alone because he believes firms that compound capital come through in the long run. He runs a focused portfolio with typically 20-30 stocks and will at times maintain a large cash stake, allowing him to buy when stock prices fall.

Jerome Clark T. Rowe Price Target-Date Retirement Series Manager Tenure: 18 years

Jerome Clark is a pioneer of target-date investing. He founded T. Rowe Price’s target-date franchise in 2002 when there were only a handful of target-date series in the industry. The firm’s target-date series has delivered strong long-term results across most vintages and has resonated with investors. Thanks in large part to Clark’s success, T. Rowe Price’s multi-asset organization now oversees $360 billion in assets including $226 billion in target-date strategies.

The T. Rowe Price Retirement series--the firm’s legacy offering--stood out from the crowd from the start with a more aggressive equity glide path than most peers, which has influenced its long-term success. The team has also continually honed its process, adjusting the series’ equity and fixed-income suballocations over time. The team believes the biggest risk retirees face is a savings shortfall, and a high equity weighting helps combat that risk; many competitors have increased equity exposures over time. Under Clark’s leadership, T. Rowe Price increased its equity allocations across target-date series in February 2020. Although the timing was less than ideal, the team is phasing in these changes over a couple of years and Clark remains confident that the higher equity allocation is critical for investor success.

Clark will be stepping down as a portfolio manager on the target-date strategies at the start of 2021. His transition has been well-telegraphed, and part of his legacy is leaving the target-date series in strong hands. Clark’s successor is Wyatt Lee, a 2020 nominee for the Morningstar Awards for Investing Excellence--Rising Talent.

TCW Fixed-Income Portfolio Management Team: Tad Rivelle, Laird Landmann, Steve Kane, and Bryan Whalen TCW Tenure Together: 16 years

The generalist fixed-income portfolio managers at TCW--Tad Rivelle, Laird Landmann, Steve Kane, and Bryan Whalen--have been among the most successful bond investors over the past two decades. The team’s flagship strategy, Metropolitan West Total Return Bond MWTIX, which has $84 billion in assets, returned 5.7% annualized and ranked in the best decile of the intermediate core-plus bond Morningstar Category from the beginning of 2005 (when Whalen joined the group) through May 2020.

Rivelle, Landmann, and Kane have worked together for decades. The three got their start at Hotchkis & Wiley, and then at Pimco, before launching their own firm, Metropolitan West, in 1996. Whalen joined MetWest in 2004 and was later added to the portfolio management team starting in 2005, turning the trio into a quartet. MetWest was purchased by TCW in 2009.

The four portfolio managers apply value investing principals to the fixed-income market as they look to buy bonds on the cheap and to sell when they grow pricey. They are unwilling to add risk when they feel bond prices are expensive, even if it means going against the crowd and forgoing yield in the short term. This has allowed their strategies to typically hold up well in downturns, as demonstrated in 2020 when markets sold off because of coronavirus fears, while also holding their own when markets rebound. Furthermore, they have demonstrated skill across various fixed-income sectors, including corporate credit and both agency and nonagency mortgages. The team’s time-tested investment approach has routinely shown why it is one of the best in the business.

Mary Ellen Stanek Baird Asset Management Manager Tenure: 20 years

Mary Ellen Stanek has demonstrated exemplary stewardship and generated strong returns for investors over her career. During her two decades at Baird, Stanek has been a staunch advocate for low fees, circumspect capacity management, and incentives to encourage analysts' career development.

Stanek and her team have shown a disciplined and risk-conscious approach to investment management since early 2000. Stanek has long avoided making interest-rate bets, instead taking a duration-neutral approach. She seeks to add value through sector rotation and security selection rather than chasing yield by digging into riskier parts of the fixed-income market or relying on big macro bets. Her commitment to employee development and the firm’s employee-ownership structure foster a tight-knit team culture with little turnover. These attributes have enriched the team’s investment process over time. Stanek’s disciplined philosophy and willingness to cultivate a team culture and add depth to the team’s core areas of competence is uncommon and commendable.

While Baird’s analyst team is relatively compact relative to its largest competitors, the firm has routinely generated competitive performance and set the standard for investor alignment under Stanek’s leadership. For the trailing 10-year period through May 2020, Baird Aggregate Bond BAGIX has outpaced 90% of category peers, while siblings Baird Core Plus Bond BCOIX and Baird Short-Term Bond BSBIX have done similarly well.

Joel Tillinghast Fidelity Manager Tenure: 30 years

Joel Tillinghast is a legendary manager with a tremendous track record among small- and mid-cap equity strategies. He has maintained a consistent and disciplined philosophy over his 30-plus-year tenure managing Fidelity Low-Priced Stock FLPSX despite that fund's huge asset base. Tillinghast's coolheaded approach has been key to the success of this strategy. He looks for resilient companies with staying power and doesn't chase fads. He seeks firms with enduring competitive advantages and management teams with integrity, while steering clear of those with lots of debt. The resulting portfolio is an eclectic collection of more than 700 names drawn from across the globe and market-cap spectrum.

Tillinghast’s low-turnover, value-oriented strategy doesn't have much of a thrill factor, but it has reliably preserved capital. For example, since 1990, the fund outperformed the Russell Mid Cap Value Index in four fifths of the one-year periods during which the index posted losses, and generally did so by a wide margin. The strategy once again proved its resilience during the COVID-19-induced bear market (Feb. 21-March 23, 2020), when the fund dropped 36.6% versus the index’s 43.7% loss. Tillinghast’s risk-conscious approach has helped produce reliable gains over the long term. The fund’s 12.4% annualized gain from its 1989 inception through May 2020 is among the best of any surviving fund in the mid- or small-cap categories. While Tillinghast has the support of Fidelity’s small-cap team and broader firm resources, his knowledge of and insight into the stocks in the fund’s sprawling portfolio have long set him apart from the rest.