3 Young Funds with Competitive Advantages

If there's one essential ingredient for an interesting investment, it's a competitive advantage.

A few recent graduates of Morningstar Prospects, a list of emerging, unknown, and re-emerging managers underscore this. To stand out in a crowded field of active and passive options, traditional active managers must demonstrate a genuine edge. Three former members of Morningstar Prospects, which is updated quarterly in Morningstar Direct, displayed distinct kinds.

Unique Knowledge

Strict Discipline

St. Paul, Minnesota-based Mairs & Power might seem too quirky because the firm focuses on companies in its home state and the upper Midwest. Look closer, though, and the odd stricture looks more like an effective method of imposing discipline and describing a circle of competence. Focusing geographically allows Andy Adams, manager of the four-year-old

Risk Aware

Surviving a trial by fire was formative for

There are many types of competitive advantages, but you could do worse than having better knowledge, discipline, and attention to risk than your rivals.

A version of this article originally ran in the second-quarter edition of Morningstar Prospects, a publication highlighting promising managers that Morningstar Manager Research analysts currently do not cover but may cover in the future. The full list and publication is available to subscribers of Morningstar Direct.