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Portfolio > Economy & Markets > Fixed Income

4 Top Active Fund Managers of 2016: Morningstar

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As the Dow Jones industrial average topped 20,000 for the first time ever, Morningstar named its 2016 Fund Manager of the Year award winners.

The awards, featured on CNBC’s “Power Lunch” program Wednesday, recognize managers who delivered “impressive performance in 2016,” produced strong long-term risk-adjusted returns and demonstrated that they were good stewards of fund shareholders’ capital.

Some of the past year’s nominees included active fund managers with firms like American Century, Vanguard, Fidelity and T. Rowe Price.

“Active managers faced many challenges in 2016 including market headwinds and heavy redemptions as investors moved their assets to passive investments. In the face of those trends, these managers stood out for remaining steadfast in their investing approach, which paid off for investors last year,” said Laura Pavlenko Lutton, Morningstar’s director of manager research for North America, in a statement.

“These Fund Managers of the Year also deserve recognition for the skill they’ve demonstrated, amassing impressive long-term records while demonstrating a commitment to shareholders,” Lutton said.

Each year, Morningstar selects leaders in four categories: domestic stock, international stock, fixed income and allocation/alternatives. The fund research firm says its team looks “across all managed products that receive a Morningstar Analyst Rating to identify the industry’s best managers.”

Read on for the names of the U.S. 2016 Fund Manager of the Year award winners by category:

T. Rowe Price Sign 

Domestic-Stock Fund Manager of the Year

David Wallack of the T. Rowe Price Mid-Cap Value (TRMCX) won the award with a return of 24.3%. This figure put him above most other nominees.

“David’s success in stock picking is mainly a result of his careful research and thoughtfulness dedicated to each company he invests in,” said Lutton, in a statement. “The fund landed in the category’s top decile and outpaced the benchmark by more than 4 percentage points in 2016. It maintained an edge on a risk-adjusted basis, landing in the category’s sixth percentile for the same period.”

According to the fund research firm, Wallack has run the fund since 2000. The fund has below-average fees and has been closed to new investors since 2010 — earning it a Morningstar Analyst Rating of Gold.

The manager also is willing to invest in “unpopular companies” such as Sysco. Since he began leading the fund, it has beaten its benchmark by 100 basis points a year on a total-return basis and by a wider margin on a risk-adjusted basis.

The other 2016 nominees in this category were:

  • Phillip N. Davidson, Kevin Toney, Michael Liss, Dan Gruemmer and Brian Woglom — American Century Equity Income (TWEIX), American Century Value (TWVLX) and American Century Mid Cap Value (ACMVX) — with 2016 returns of 19.5%-22.8%;
  • Scott Brayman and team — Champlain Small Company (CIPSX) — with returns of 28.0% in 2016; and
  • Jerome Dodson and team for Parnassus (PARNX) — 2016 returns of 13.5%;
  • Primecap team — Vanguard Primecap (VPMCX), Vanguard Primecap Core (VPCCX), Vanguard Capital Opportunity (VHCOX), Primecap Odyssey Growth (POGRX), Primecap Odyssey Stock (POSKX) and Primecap Odyssey Aggressive Growth (POAGX) — with returns of 8.4%-12.8% in 2016.
A screenshot of Oakmark International Website

International-Stock Fund Manager of the Year

David Herro of Oakmark International (OAKIX) has been this fund’s lead manager since its 1992 inception. Herro was Morningstar’s 2006 International-Stock Fund Manager of the Year and International-Stock Fund Manager of the Decade for 2000-2009.

The fund reopened to new investors in July following significant outflows since it closed in 2013, according to the Chicago-based research group.

“David is not afraid to buy out-of-favor stocks and wait for improvement,” Lutton said, in a statement. “His patience keeps paying off; the fund has beaten more than 90% of its category peers over the trailing five, 10 and 15 years.”

The other 2016 nominees in this category were:

  • David Samra and Daniel O’Keefe — Artisan International Value (ARTKX) with a 2016 return of 5.5%; and
  • International Investment Policy Committee — Dodge and Cox International Stock (DODFX) with a return of 8.3%.

Ford O’Neil 

Fixed Income Fund Manager of the Year

Winner Ford O’Neil and his team of portfolio managers with the Fidelity Total Bond Fund (FTBFX) have “provided consistent leadership and strong risk-adjusted results for investors in 2016 and in years past,” according to Morningstar.

The fund’s 2016 return was 5.9%, and its expense ratio is 0.45%.

Rather than placing bets on interest-rate trends, the Fidelity fixed income team works to be in the top half of its intermediate-term bond category over rolling 36-month periods through its sector, yield curve and individual security picks.

Last year, it was underweight in mortgages, overweight in high yield, and held positions in financials, energy and Treasury inflation-protected securities.

“Given the fund’s structural exposures to high yield and credit in the previous year, combined with excellent security selection in those allocations, 2016 provided a strong showcase of what Ford and his team do well,” explained Lutton. “In the past, this fund’s performance has been aided by strong security selection and sector allocations.”

The other 2016 nominees in this category were:

  • Mary Ellen Stanek and team — Baird Core Plus (BCOIX) with a 2016 return of 4.7%;
  • Fixed Income Investment Policy Committee — Dodge and Cox Income (DODIX) with a return of 5.6%;
  • Ray Kennedy, Mark Hudoff, Patrick Meegan, and Richard Mak — Hotchkis and Wiley High Yield Fund (HWHIX) with a return of 16.0%;
  • Michael Hasenstab and Sonal Desai — Templeton Global Bond (TGBAX), Templeton Global Total Return (TTRZX) and Templeton Global Income (GIM) with returns of 6.6%, 8.7% and 5.2% respectively.


Allocation/Alternatives Fund Manager of the Year

The Equity and Fixed Income Investment Policy Committees of the Dodge and Cox Balanced Fund (DODBX) were singled out for their “deep and experienced management team …, a rock-bottom expense ratio of 0.53%, and a strong long-term performance record,” according to Morningstar.

The fund had a return of 16.6% last year. Its leaders have general been with Dodge and Cox for more than 20 years on average.

“On the equity side, a rebound in financials stocks, such as Bank of America and Goldman Sachs, and prudent picks in the technology and consumer cyclicals sectors helped drive results,” Lutton said. “In credit, the fund benefited from its overweighting to rallying corporate credit names, such as Pemex and Teck Resources, as well as its long-time short duration stance as interest rates rose. In allocation, the fund’s nearly 70% equity exposure was more than most peers, which helped in a rallying equity market.”

The other 2016 nominees in this category were:

  • Robert Jones — Boston Partners Long/Short Equity (BPLSX) with a 22.5% return; and
  • Steven Romick, Brian Selmo, and Mark Landecker, FPA Crescent (FPACX) with a 10.3% return.

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