This video is an excerpt from the recent Morningstar FundInvestor 20th Anniversary Celebration Roundtable webcast. Tune in to Morningstar.com Saturday, Sept. 29 to view the webcast in its entirety.
Susan Dziubinski: What are some of your favorite funds today and why? Russ, do you want to start?
Russ Kinnel: Sure, I do. I'll take all the good ones. So I was thinking sort of old-school, new-school. So ones that we've been raving about in FundInvestor for many, many years that are still great, PRIMECAP, both under Vanguard and PRIMECAP Odyssey, just among the best growth investors, very strong fundamental investors. Sequoia, classic value shop handed over the next generation; I think they're doing a great job. Loomis Sayles Bond--Dan Fuss and Kathleen Gaffney are really good, more aggressive managers obviously, but I think they know what they are doing and take intelligent risks.
And newer funds that we've probably only been writing about the last few years: Brown Management Small Company recently reopened; a great small-growth fund run out of Baltimore, very patient investors. Matthews Asia Dividend, another place to look for income. Asian stocks are now paying decent dividends and, again, you have some great growth exposure, and I think it's good to have some emerging-markets exposure given that they're lower-debt economies. Harbor Commodity Real Return is my commodity play. BBH Core Select, a good old-school-focused, high-quality fund. A really good, just basic, keep-it-simple fund.
Dziubinski: Christine?
Christine Benz: I'll pick up on Russ' PRIMECAP idea. I own the PRIMECAP core fund, Vanguard PRIMECAP Core. I like it a lot. I like it more even today because they're not having the best year that they have had in recent memory, though I think decent in absolute terms. Longleaf Partners is another one of my personal holdings. It's one of those funds where I think some of the analysts look at that and say, "Why do you guys like that fund so much?" I just really like its clearly articulated, clearly executed strategy of looking for companies that the managers think are trading at a big discount to what they think they are worth. So, I think it's a truly active portfolio, which is another thing I like. If I'm paying for active management, I want to see a truly active-looking portfolio.
Dziubinski: John?
John Rekenthaler: My picks, I will admit to being a little, I guess, personal. Idiosyncratic. Because I'm not really on the beat these days. I started off as a fund analyst and I used to cover funds. In fact I've been around long enough when we used to have 777 funds in our old binder, and that was pretty much the industry and I really could quite literally tell you the portfolio manager of every mutual fund. I'm a long ways away from that now and my role and methodology has pulled me away. But I'll give you some personal picks.
One is PowerShares Financial, PGF, that's an exchange-traded fund. So one thing that's changed is I'm recommending an ETF, right, from an old mutual fund person. There are a lot of interesting strategies that are out there. I mean the ETF market--the development that's been great for investors. There are definitely some fringe and strange product out there and some dangerous stuff and so forth, but overall it's been great in terms of the opportunity set offered to investors, the transparency of the portfolios, the low costs, and so forth.
I think this is a great opportunity. I've had this fund for a couple of years. It's invested in preferred stocks of largely banks, European banks. It's far from a cash substitute. So I don't offer it as a cash substitute. Maybe the way to think of it is sort of as a medium-risk kind of portfolio that moves around its preferred stock. But it's paying about a 6% yield, and actually in 2008 it got whacked as financials went down. But even though this is exposed to European banks, it's really been very steady through the whole euro crisis and such.
You're going to get paid unless these banks go under. So if they struggle a bit, that's fine. So really these things are only going to get knocked down if the news gets really bad with the bank assets, not just kind of bad. I think it's a pretty good businessperson's risk, as they say.
Another one, FPA Crescent--that's more familiar. We have Steve Romick out at our conference quite a bit. I've moderated a couple of his panels; that's one way I know about the fund. I don't actually own this one, but I probably should, and this is a great go-anywhere fund--stocks, bonds. Not from a real model tactical asset allocation, but bottom-up. He sees values, and famously he saw a lot of value in high-yield securities around the end of 2008, early 2009, and bought in at the bottom when not many people do. And you got to give credit for that. But he has made a lot of good moves over time. This is another what I would call a medium-risk sort of fund. In a way, it's a very distant cousin of the preferred fund, PowerShares Financial, that I mentioned. But this probably has the same kind of role in a portfolio and uses some yield, too.
Finally, third, a shout-out to Artisan Global Fund run by Dan O'Keefe. Dan's first job was here at Morningstar working for me, and he was a very bright young man then, now he is a bright, somewhat older man. He's done great job, and he was Manager of the Year for, I think, the International Fund of the Year.
Kinnel: Right, International Value.
Rekenthaler: So, International Value is closed, but the Global Fund is open, and that's a classic value global fund.
Kinnel: And it's a fund that has a good chunk in of institutional investors, but the mutual fund has escaped people's notice for some reason.