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Best Fund Managers of 2015: Morningstar

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Morningstar announced Tuesday its 2015 U.S. Fund Manager of the Year award winners, with managers from Brown Capital Management, American Funds, PIMCO and Vanguard being honored.

The 2015 awards marks the 29th year Morningstar has bestowed the honor on the managers that the Chicago-based fund research firm says deliver impressive performance, excellent long-term risk-adjusted returns, and exhibit “tremendous skill” in their field.

Each year, Morningstar selects leaders in five categories: domestic stock, international stock, fixed income, allocation and alternatives. Check out this year’s full list of nominees in Top 14 Fund Managers of 2015: Morningstar.

Here are Morningstar’s picks for the 2015 Fund Manager of the Year award:

Domestic Stock

The team from Brown Capital Management Small Company (BCSIX) — Keith Lee, Robert Hall, Kempton Ingersol, Damien Davis, and Andrew Fones — were honored in this category for employing “a unique and patient strategy, buying companies that earn $250 million or less in revenue at the time of initial investment and ‘save lives, time, money, or headaches,’” according to Morningstar.

Keith Lee and Robert Hall have led Brown Capital Management Small Company since the fund’s inception in 1992. The fund has a Morningstar Analyst Rating of Gold, the company’s highest Medalist rating.

In 2015, the top 10 contributors to performance have been in the portfolio for an average of nine years.

“Since we launched the Morningstar Analyst Rating in 2011, the fund has carried a Gold rating,” said Jon Hale, Morningstar’s director of manager research, North America. “In a year when stocks struggled to stay positive, the fund gained 8.8% in 2015, while its typical small-growth fund peer lost 2.4%. The fund ranked in the top percentile over the trailing one-, three-, five-, and 10-year periods.”

International Stock

Robert Lovelace — who has been on the fund for 15 years and is its longest-tenured manager, and serves as the fund’s principal investment officer — along with the team at the helm of the American Funds New Perspective (ANWPX), won top honors in this category.

American Funds New Perspective has a Gold Analyst Rating and Positive scores for all five pillars of the Analyst Rating — Process, Performance, People, Parent and Price, Morningstar says.

At $60 billion in assets, the fund is the second largest in the world-stock category, and its 5.3% gain in 2015 beat the MSCI All Country World Index by 7.7 percentage points, landing in the category’s top decile.

The fund has also placed in its peer group’s top half in each of the past 10 calendar years.

“The team’s strong stock selection has continually led performance at this fund. The top three holdings in 2015 — Novo Nordisk, and Regeneron Pharmaceuticals — were up 40%, 118%, and 32%, respectively, last year,” Hale said. Fixed Income

Jerome Schneider and the team leading the PIMCO Short-Term Fund (PTSHX) won in this category.

Schneider, who has led the team at PIMCO Short-Term since 2010, also contributes to the management of other funds across PIMCO, and, according to Morningstar, “makes high-conviction purchases and follows a careful approach, focusing on liquidity and minimizing risk.”

The fund, which has a Silver Analyst Rating, gained 1.4% in 2015, placing in the best percentile of the ultrashort-term bond category. For the trailing one-, three- and five-year periods, the fund’s total return has landed in the top quartile of the category.

“In a year when short-term interest rates rose sharply and many bond funds failed to earn a positive return, performance at PIMCO Short-Term stands out,” said Hale. “Schneider actively adjusted the fund’s yield curve positioning and rate sensitivity over the course of the year, which contributed a healthy portion of its returns. He leads a robust, stable team at PIMCO, which has effectively steered the fund away from troubles in the ultrashort category.”

Allocation Fund

John Keogh and Michael Reckmeyer won top honors from Morningstar for jointly leading the Vanguard Wellesley Income Fund (VWINX).

In the 45 years of Vanguard Wellesley Income’s existence, the fund has lost money in only six years, Morninstar notes, with Keogh and Reckmeyer having jointly led the fund, which is subadvised by Wellington Management, since July 2008.

Under their leadership, the fund has gained an annualized 7.7% through 2015, placing second out of 140 conservative allocation category peers. In 2015, the fund gained 1.3%, which is double the return of its customized benchmark, landing in the top percentile of its category. The fund has a Gold Analyst Rating and Positive scores for all five pillars.

“Lower-than-average volatility, combined with a balanced approach to providing income, capital appreciation, and downside protection, has provided the fund with a stellar record,” Hale said. “The fund is one of the least expensive offerings in its category. Keogh and Reckmeyer have been at Wellington for more than 50 years combined and have a proven, consistent process.”

Alternatives Fund

James Troyer, Michael Roach and James Stetler received their second consecutive nomination for leading the Vanguard Market Neutral (VMNIX) fund.

The fund has a Silver Analyst Rating and Positive scores for all five pillars. Since Vanguard obtained full management of the fund in 2010, it has consistently been one of the top performers in the category with total returns of 6.2% in the trailing three-year period and 5.0% in the trailing five-year period.

The fund placed in the top decile of the category in both periods.

“The team at Vanguard Market Neutral follows a consistent and transparent approach,” Hale said. “In 2015, they proved that investors don’t have to pay excessive fees for robust returns that aren’t highly correlated to the market. The fund has the lowest expense ratio of any alternative fund and gained 7% in the third quarter of 2015 while the S&P 500 fell 6.4% and the market neutral category was flat.”

— Check out Top 5 Target Date Fund Families in 2015 on ThinkAdvisor.


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