Analysts updated several funds that you may already know and brought some new names into the mix.
By Kenneth Oshodi
In September, Morningstar manager research analysts upgraded the Morningstar Analyst Ratings of seven funds, downgraded the ratings of two funds, and affirmed ratings on 77 funds. The team also assigned new ratings to 20 mutual funds and one exchange-traded fund, and placed one fund Under Review. Below are some of September’s highlights, followed by the full list of ratings changes.
Prudential Jennison Growth PJFAX was upgraded to a Gold rating from Silver because of continued improvements at its parent company. Prudential Growth Investment Management has notable strengths, including a positive culture, and it has continued to move in the right direction. Board trustees have pushed for lower fees, and manager investment in the Prudential funds has also improved.
Individually, Prudential Jennison Growth’s seasoned management team, consistent process, and below-average fees are the subsequent drivers of its Gold rating. Comanagers Michael Del Balso, Kathleen McCarragher, and Sig Segalas have comanaged this fund for nearly two decades and collaborate with the fund’s experienced analyst team to employ a bottom-up, fundamentally driven approach that focuses on the durability of a company's growth and favors businesses with strong balance sheets, excellent research and development skills, and wide moats. These positives are only bolstered by the fund’s below-average fees.
The rating for Janus Henderson Global Research JANWX was downgraded to Neutral from Bronze after substantial turnover across its analyst team. Nearly half of the fund’s 34 analysts have turned over since June 2014 for a variety of reasons, including performance-based firings. In spite of this negative, the fund has several positives. Carmel Wellso, who began leading the fund in December 2014, has an impressive resume. Her experience includes two years in Janus' Singapore office mentoring analysts there, plus a seven-year stint leading Janus International Equity until its March 2017 liquidation. The fund also boasts some experienced analysts among the group that remains, although half of the group has only been on the job for three years. That said, turnover picked up again in the 12 months prior to Aug. 31, 2017, and the recent merger between Janus and Henderson could lead to another bout of departures.
Wasatch Small Cap Growth's WAAEX rating was downgraded to Silver from Gold for several reasons, greatest of all is its rising fee profile. This fund’s expenses have risen while peers’ expense ratios have generally been declining, and as a result each of its share classes now ranks as Above Average when compared with similarly distributed small-cap peers. Recent returns have also lagged, and the fund’s 7.8% annualized return over the 10-year period that ended Sept. 30, 2017, trailed its Russell 2000 Growth Index benchmark’s 8.5% annualized return. The higher fee hurdle will make it a bit more difficult for the fund to outperform in the future. In addition, the management team recently saw a reconfiguration. Jeff Cardon, who had run the fund since its 1986 inception, stepped back to a comanager role in early 2016 and Wasatch announced that he will retire at the end of 2017. Lead management duties went to J.B. Taylor in 2016, who will continue in that role. He had been comanager since January 2013 and was joined by two comanagers in August 2017 (Ryan Snow and Ken Korngiebel). The team is still solid and the is fund appealing, but Silver is a more appropriate rating in light of these developments.