In June, Morningstar manager research analysts affirmed the Morningstar Analyst Ratings of 74 funds and one target-date series; downgraded the ratings of four funds; placed one target-date series under review; and assigned new ratings to 83 funds. Below are some of June’s highlights, followed by the full list of ratings changes.
Lead portfolio manager Tom O’Halloran, who has led the fund since 2003, employs an aggressive, high-growth strategy that has historically favored firms with strong revenue and earnings growth. However, O’Halloran and his team set aside this preference in 2016, adding basic materials stocks in anticipation of increased federal infrastructure spending. These unusual picks haven’t panned out, and the small-growth Morningstar Category fund posted a dismal 2016 return which ranked in the bottom decile of peers, following another bottom-decile result in 2015.
Beyond underperformance, the analyst team has experienced turnover as some longtime analysts left. Three of the seven team members have joined since 2014, resulting in shuffled sector coverage. While the heavy-trading fund, which often posts an annual turnover near or north of 200%, has fared better in 2017, its current investment team needs to prove itself.