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5 Funds Whose Trailing Returns Don't Tell the Whole Story

The bull market in equities since the credit crisis has masked the volatility of these funds.

Securities In This Article
AMG GW&K Small Cap Value N
Morgan Stanley Inst Growth A
Fidelity Capital & Income
Western Asset Core Plus Bond I
Western Asset Core Bond I

A version of this article was published in the April 2016 issue of Morningstar FundInvestor. Download a complimentary copy of FundInvestor here.

Trailing returns serve as a useful tool to compare a fund’s performance with its benchmark or peer group. However, the measure often disguises how volatile a fund has been during a longer time frame. That’s especially true when a fund has recently turned in very strong or poor performance, which can bias its trailing returns.

On March 9, 2016, the U.S. equity bull market celebrated its seven-year anniversary. Many funds that struggled during the credit crisis have excelled during the rally and now boast excellent trailing returns relative to their Morningstar Category peers. Investors should keep in mind that these funds’ trailing returns don’t tell the whole story.

We’ve gathered funds from the Morningstar 500 that had bottom-quintile showings during the credit crisis yet boast top-quartile returns during the trailing three-, five-, and 10-year periods through March 2016. All of the funds represent strong long-term options. However, they require patience; each fund receives a Morningstar Risk rating of High or Above Average.

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About the Author

Leo Acheson

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Leo Acheson, CFA, is director, multi-asset ratings, global manager research for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc.

He oversees Morningstar’s multi-asset ratings as well as the firm’s multi-asset and alternatives manager research team. The group covers a range of investment vehicles, including allocation strategies, alternatives, target-date funds, 529 plans, HSAs, model portfolios, and Mexican pension funds.

Before joining Morningstar in 2013, Acheson spent four years working for a Chicago-based investment consultant, conducting mutual fund and asset-class research to help corporations manage their investment programs.

Acheson holds a bachelor’s degree in finance and accounting from Indiana University’s Kelley School of Business. He also holds the Chartered Financial Analyst® designation.

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