Morningstar Advisor - February/March 2012 - (Page 25)

International-stock funds took in $3 billion, while balanced funds took in $11 billion. Taxable-bond funds took in $135 billion, and munis shed $11 billion though that trend reversed by the fourth quarter. Alternative funds took in $12 billion net, and commodities funds took in $9 billion. On a fund level, the top draws were Templeton Global Bond TPINX: $13 billion; DoubleLine Total Return DBLTX: $11 billion; and MainStay Large Cap Growth: $8 billion. The most redeemed funds were American Funds Growth Fund of America AGTHX: negative $33 billion; American Funds Capital World Growth & Income CWGIX: negative $9 billion; and Fidelity Diversified International FDIVX: negative $8 billion. Cerulli Says: Discretion Growing Broker/dealer advisors plan on increasing their allocation to fee-based advisor discretionary business by 8 percentage points over the next two years, at the expense of nondiscretionary brokerage assets, according to recent research by Cerulli Associates. In addition, homeoffice managed assets, which currently accounts for only 11% of advisor portfolios, are expected to increase to 13% by 2013. Adoption of discretionary accounts allows advisors to spend more time on adding and strengthening client relationships rather than seeking trade approval. Percent of Portfolio Assets Business Model 2011 2013 2011 and 2013 % Difference Fee-based advisor discretionary (advisor controlled) Brokerage, nondiscretionary (client approves trades) Fee-based nondiscretionary (client approves trades) Fee-based firm discretionary (B/D home-office or third-party managed) 42% 22% 17% 11% 6% 2% 59% 50% 13% 14% 13% 8% 2% 71% 8% –9% –3% 2% 2% 0% 12% These Funds Face a Makeor-Break 2012 Morningstar takes a long-term, fundamental approach to investing and fund analysis. Morningstar fund analyst Greg Carlson recently took a look at four funds where poor performance in 2011—and, just as important, the reasons for their struggles—is causing Morningstar analysts to re-evaluate their prospects. Janus Fund JANSX, Janus Twenty JAVLX Jonathan Coleman and Ron Sachs took over Janus’ two flagship funds—Janus Fund and Janus Twenty, respectively—in November 2007 and January 2008 in what represented a changing of the guard at the firm. They replaced the departing David Corkins and Scott Schoelzel, who had both amassed impressive records running Janus funds since 1997. Each manager has struggled. Overall, Janus Fund and Janus Twenty have trailed 70% and 85% of large-growth funds, respectively, during Coleman’s and Sachs’ tenures. Brokerage, discretionary (advisor controlled) Other Total discretionary programs Sources: Cerulli Associates, in partnerships with the Financial Planning Association, Investment Management Consultants Association, Advisor Perspectives, and Morningstar. Brandywine BRWIX, Brandywine Blue BLUEX These funds, which seek out companies that management believes are poised to beat Wall Street’s earnings expectations, have performed terribly for the past four years. Lead manager Bill D’Alonzo and his team contend that the funds’ poor performance is largely the result of stock prices being driven by macroeconomic sentiment, rather than by corporate earnings, for the past several years. But four years of wretched returns is a long time to pin on a single factor. It may be the case that the extensive channel checks that the team performs to estimate companies’ prospects are no longer effective, leaving the funds without a long-term edge. VA Sales Hold Steady New sales of variable annuities held steady in the third quarter, totaling $38.5 billion versus $39.4 billion in the second quarter and $33.8 billion in the third quarter of 2010. On a year-to-date basis, sales were solidly ahead of the previous year, coming in at $116.7 billion versus 2010 third-quarter year-to-date new sales of $99.5 billion, a 17.2% year-over-year increase. Assets under management of $1,422 billion were down 9.3% from secondquarter assets of $1,567 billion because of negative market performance, as evidenced by a 14.3% decline in the S&P 500, and virtually unchanged from third-quarter 2010 assets of $1,418 billion. A very bright spot in the third-quarter data was the significant increase MorningstarAdvisor.com 25 http://www.MorningstarAdvisor.com

Table of Contents for the Digital Edition of Morningstar Advisor - February/March 2012

Morningstar Advisor - February/March 2012
Contents
Contributors
Letter From the Editor
Make a Difference Stories, Not Debates
How Concerned Are You About Europe?
Analytical and Independent
What to Ask When a Fund Manager Leaves
Past, Present, Future
Have Financials Gotten Cheap Enough?
Four Picks for the Present
Investment Briefs
Tactical Funds Miss Their Chance
Specialty Retail: Ad Hoc Opportunity
How Europe Is Making Its Crisis Worse
Impact on U.S. Economy Will Be Minimal
European Banks: Bargains or Value Traps?
Don’t Count the Euro Out Yet
Europe on the Brink
GoodHaven Realizes Its Vision
How Index Trading Increases Market Vulnerability
Nonlisted REITS: Handle With Care
Safety Picks for the Many Moods of Mr. Market
On the Prowl for Large- Blend Index-Beaters
Our Favorite Mutual Funds
50 Most Popular ETFs
Undervalued Stocks With Wide Moats
The Math That Matters

Morningstar Advisor - February/March 2012