5 Funds Where 10-Year Returns Tell the Whole Story

A version of this article first appeared in Morningstar FundInvestor.

The best time period by which to judge a fund is its manager's entire tenure. Whether that's 29 months or 29 years, you want as much data as possible. Obviously, the longer the better, in order to assess manager skill over a variety of markets. However, we can't provide 100 different time periods in our performance tables, so we present the standard trailing time periods. As it happens, some of our Morningstar Medalists recently crossed the 10-year threshold for manager tenure. That tells you that they own the Morningstar Rating for funds (the star rating), as well as all the total returns displayed. Thus, it seems like a good time to look at five funds where the 10-year record really is the best to go with. The returns I share are through the end of February 2016.

Mairs & Power Growth MPGFX

Mark Henneman has helped produce a solid 7.2% 10-year return. He can't be said to own the whole record--William Frels was lead manager until July 2013 and stayed on as comanager until the end of 2014--but Henneman has been an integral part of the process. The strategy is to invest very patiently in a focused portfolio of stable firms with competitive advantages. Results have been quite consistent: During the past 10 years, the fund has produced rolling three-year returns that land in the top quartile of its peer group for 68% of the time. The fund has a Morningstar Analyst Rating of Silver.

Berwyn Income BERIX

George Cipolloni III has produced outstanding 10-year returns of 6.6% that land in the top 1% of conservative-allocation Morningstar Category funds. This Silver-rated fund takes a contrarian value approach. Cipolloni and his comanagers buy dividend-paying stocks, corporate bonds (mainly high-yield), preferreds, and convertibles. Management tends to actively move around the bond market to scoop up the best values.

BBH Core Select BBTEX

Timothy Hartch took the helm at this Silver-rated fund in October 2005, and the fund's 10-year return is an impressive 8.1% annualized, well ahead of the S&P 500's 6.5% return. Hartch runs a very disciplined approach that buys stocks trading at 25% or greater discounts and then automatically sells once that discount drops below 10%. He wants companies with sustainable competitive advantages and strong balance sheets. It's not easy to find such companies trading at big discounts, which may be one reason he runs a concentrated portfolio. The fund lagged its peers in recent years but lost much less in January 2016 thanks to steady names like

Diamond Hill Small-Mid Cap DHMAX

Chris Welch has run the fund since its inception at the end of December 2005, and he's had a very nice run. Welch applies a patient value approach very much informed by Graham and Dodd. He estimates a firm's intrinsic value and seeks to buy at a sizable discount. He also keeps a fairly compact portfolio of 55-70 names. He's produced a 7.4% annualized return during the past 10 years, and that's good for the top 10% of the mid-value category. The fund has been a very consistent performer, but that means Welch now has the challenge of running quite a bit more money than before. The fund now tops out at $1.5 billion, whereas it was only $100 million five years ago.

American Funds American Mutual AMRMX

While no single manager at American Funds can be said to own the fund's entire record, three of the fund's six managers started on this Gold-rated fund in January 2006 and one more joined in 2007. The three who began in 2006 are Joyce Gordon, James Lovelace, and James Terrille. During their tenure, the fund has returned 6.3% annualized to land in the top 14% of the large-value category. They're skilled stock-pickers who focus on competitively advantaged and attractively valued dividend-payers. Add in a low expense ratio, and you get strong results.

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