4 New Funds on Our Radar

Morningstar Manager Research’s latest list of overlooked or emerging fund managers and strategies includes offerings from three industry stalwarts.

Here’s a look at four of the 11 strategies the team added to the July 2024 Morningstar Prospects list.

Artisan International Explorer ARHBX

This international small-cap strategy launched in November 2020 (via a separate account), shortly after managers Beini Zhou and Anand Vasagiri joined Artisan Partners; the mutual fund later launched in May 2022. Zhou and Vasagiri are boomerang Artisan employees who previously worked as analysts under David Samra on foreign large-cap offering Artisan International Value APHKX, which has a Morningstar Medalist Rating of Gold, before leaving for portfolio management opportunities elsewhere. Zhou worked for Matthews Asia from 2013 to 2020, successfully managing a few non-US small-cap mandates; Vasagiri was a portfolio manager at Paradice Investment Management from 2010 until 2019. The managers sit within Samra’s international value group at Artisan, though they operate independently. Like the broader team, Zhou and Vasagiri seek stocks trading at big discounts to their intrinsic value estimates but also emphasize quality firms with financial strength and shareholder-oriented management. That has resulted in a portfolio landing in the core section of the Morningstar Style Box. The strategy is concentrated, typically owning between 20 and 40 stocks, with position sizes sometimes approaching 10% of assets. Like most Artisan offerings, fees rank among the most expensive in the peer group.

T. Rowe Price Global Multi-Sector Bond Fund PGMSX

T. Rowe Price Global Multi-Sector Bond Fund’s team employs a unique approach and boasts an enviable track record.

The fund’s manager duo averages 15 years of industry experience and brings strong foreign-currency market experience. Lead manager Kenneth Orchard, who has been with the firm for 13 years, took over this strategy in 2018. In mid-2019, the team hired an external associate manager with 10 years of industry experience to support Orchard. The team draws on T. Rowe Price’s fixed-income sector managers, credit analysts, traders, quantitative analysts, and economists. While Orchard is the sole named manager, his team includes five sector portfolio managers specializing in asset-backed securities, mortgage-backed securities (both commercial and residential), global investment-grade, global high-yield and loans, and emerging-markets corporate sectors.

A well-structured and well-executed process considers both top-down and bottom-up research for security selection, sector allocation, and duration management. Daily interactions between managers and analysts focus on portfolio characteristics and risk assessment. While Orchard guides positioning, sizing, and macro views, sector managers handle sector allocation and security selection. The portfolio takes on more credit risk than typical peers, with a maximum of 65% in below-investment-grade debt. Its 27.3% of the assets (as of June 2024) in non-investment-grade debt is more than its global bond-USD hedged Morningstar Category peer median, giving it a yield advantage. The sector strategy advisor group plays a pivotal role in assessing credit risk and making strategic decisions.

Performance stands out since Orchard took the reins. Over Orchard’s tenure since February 2018, the fund’s I shares’ 2.4% return through June 2024 ranks in its category’s top decile and beat the Bloomberg Global Aggregate Index’s 1.5%. On a risk-adjusted basis (as measured by Sharpe ratio), the fund landed in the top decile during the same period.

Voya Target Retirement Funds/Trusts (one glide path: VTRKX)

Voya Target Retirement series combines high-quality third-party exchange-traded funds with the firm’s own actively managed funds to produce cost-effective blended portfolios.

The series’ taps well-regarded index ETFs from providers such as iShares and Vanguard, as well as active funds managed by Voya and its subadvisors. For example, Silver-rated Nuveen S&P 500 Index TISPX anchors the equity sleeve, while Silver-rated Voya Intermediate Bond IIBZ and Gold-rated iShares Core US Aggregate Bond AGG make up the bulk of the series’ fixed-income allocation. As of June 2024, 87% of the series’ assets sits in funds that earn Morningstar Medalist Ratings of Silver or higher. At 25 basis points, its price is attractive compared with Voya’s Solution series, which costs more than twice that amount.

The Target Retirement series is one of four target-date offerings overseen by the firm’s multi-asset strategies and solutions team, all of which share the same glide path and allocation process. At 95% equity, the glide path is more aggressive than peers in longer-dated (2065, 2060) target retirement year portfolios, as it aims to maximize growth while participants have a long investment time horizon. The glide path becomes more conservative than the average peer as investors approach retirement, aiming to provide better downside protection. The gap is widest at retirement, when Voya allocates 35% to stocks versus the average peer at 46%.

Management takes the same active approach to asset allocation applied across Voya’s suite of target-date products. At least once per year, the team reviews its long-term capital market assumptions, which inform the series’ strategic asset-class and sub-asset-class exposures. Lead manager Barbara Reinhard has support from a four-member asset-allocation team to implement measured, but frequent, short-term tactical allocation changes driven by fundamentals, valuation, and sentiment.

WisdomTree US Value WTV

WisdomTree US Value ETF systematically collects companies offering the best combination of shareholder yield and quality. Shareholder yield measures the total payout stockholders receive via dividends and net buybacks. Screening for companies with a high total payout and favorable quality measures should result in a portfolio of sound businesses that are returning cash to shareholders. The quality screen excludes stocks with unsustainable payouts that could be riskier and keeps turnover down.

The merits of a shareholder-yield strategy are disputed. On one hand, dividend-focused portfolios tend to concentrate in steady value names whose earnings stability can provide a long-term advantage. On the other hand, buyback-focused portfolios back into quality stocks but often have high turnover because firms start and stop buybacks opportunistically. Combining dividends and buybacks with measures that home in on sound businesses could offer investors an appealing combination of downside protection and growth potential.

The fund has fared better than dividend- or buyback-only funds since it adopted its current strategy in December 2017. It also outpaced the Russell 1000 Value Index in that time. Incorporating buybacks increases risk compared with the benchmark and steadier dividend-only funds, but the fund has had a substantial risk-adjusted return advantage against most peers and relevant benchmarks.