Mutual Fund research conducted by club members.

1. Getting to know
Mutual Funds
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2. What are Mutual Funds
• Investment vehicles comprised of funds collected from
many investors for the purpose of investing in securities
• Mutual Funds are like pre-packaged portfolios
• Each fund is structured to match an investment objective
• For more information see me
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3. Rating Services
• Professionals pay for service subscriptions which
analyze and rate the health of different funds
o Most popular service is Morningstar
o We will be using Morningstar for our information today
• Wealth Management firms rely on these services to
provide them with accurate and reliable information
• It is common for professionals to have subscriptions to
multiple services
o It is best to subscribe to contradicting services to increase exposure
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4. Disclaimer
• Morningstar can be particularly conservative relative to
competition
• Neither Morningstar nor its Information Providers can
guarantee the accuracy, completeness, timeliness, or
correct sequencing of any of the Information on the Web
site, including, but not limited to Information originated by
Morningstar, licensed by Morningstar from Information
Providers, or gathered by Morningstar from publicly
available sources. There may be delays, omissions, or
inaccuracies in the Information.
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5. Index vs.
Managed Funds
• Index funds are generally designed to reflect a specific index
o In our example we will be using Vanguard Total Stock Market Index I
• Reflects entire U.S. equity market
o Highlighted by low expense ratios, broad diversification, & balanced sector weighting
• Managed Funds believe they can beat the market
o And they do, sometimes
• However, due to expenses & variability they generally underperform compared to
Index Funds over time
o Average 1% more in expenses annually
• Most of our funds will be actively managed, preference of firm
owner
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6. We will be looking at Large
Blend/Growth Funds
• Our categories
o Morningstar Style Box
o Morningstar Rating
o Sharpe Ratio
o Alpha
o Expense Ratio
o % Rank Cat Average over 5 years
o # of stocks
o Sector Weightings
o Performance compared to S&P
• We will prefer highly rated funds with high Sharpe
ratios/Alpha, low expense ratios, high diversification, and
balanced sector weightings
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7. The Style Box
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• Market “Cap” Size
• Large/Big
• $10 Billion or greater
• Medium
• $2-10 Billion
• Small
• $300 Million-$2 Billion
• Equity Selection
• Value
• Stocks trades below believed value
• Blend
• Growth
• Stocks whose earnings are expected to grow
Popularized by
Morningstar

8. Here is our first look
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Fund Name Ticker Morningstar Rating Equity Style
MainStay MAP I MUBFX Bronze, **** Large/Giant Blend
Fidelity Advisor Large Cap I FALIX FALIX Silver, ***** Large Blend
ClearBridge Appreciation I (USD) SAPYX Bronze, **** Large Blend
Artisan Value Fund Investor Shares ARTLX Silver, **** Large Blend
Ivy Large Cap Growth I IYGIX Bronze, ** Large Growth
Hotchkis and Wiley Large I (USD) HWLIX *** Large Value
Artisan Mid Cap Inv ARTMX Silver, **** Mid Growth
Calamos Focus Growth I (USD) CBCIX ** Large Growth
MainStay Large Cap Growth I MLAIX Bronze, **** Large Growth
Guggenheim Large Cap Value A LW (USD) - *** Large Value
Oakmark I (USD) OAKMX Gold, ***** Large Blend
Oakmark II (USD) OARMX Gold, ***** Large Blend
Oakmark Select I (USD) OAKLX Gold, **** Large Blend
Oakmark Select II (USD) OARLX Gold, **** Large Blend
Vanguard Total Stock Market Idx I (USD) VTSMX Gold, **** Large Blend

9. Key Figures/Ratios
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Sharpe Ratio Alpha (standard) Expense Ratio
1.08 -2.8 0.86
3.85 5.14 0.91
1.36 0.75 0.69
1.12 -1.1 1.04
1.1 -1.6 0.88
1.17 -1.11 1.05
1.09 -0.4 1.22
0.87 -4.96 0.9
1.05 -2.9 0.77
0.98 -3.88 1.15
1.41 1.86 0.95
1.39 1.52 1.23
1.29 0.99 1.01
1.27 0.68 1.33
1.25 0.63 0.17
• Sharpe Ratio
• Measures risk-
adjusted performance
• Alpha
• Measures risk-
adjusted performance
& compares to a
benchmark index
• Expense Ratio
• Measure of cost
• Operating Expenses /
assets avg. $ value
under management

10. Alpha & Sharpe Ratio
• Alpha
o The excess return of an investment relative to the return of the benchmark index
is its “alpha”
o A positive alpha of 1.0 means the fund has outperformed its benchmark index by
1%
o Index for these funds: S&P 500
• Sharpe Ratio
o Measured by subtracting risk free rate (T-Bill) from the rate of return for an
investment and dividing the result by the investment’s standard deviation
o Tells investors whether an investment’s returns are due to smart investment
decisions of the result of excess risk
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11. Expense Ratio
• Measures what it costs an investment company to
operate the mutual fund
• Index funds take advantage of low expense ratios and
thus do not technically have to outperform Actively
Managed Funds
Operating Expenses
/
Avg. dollar value of its assets under management
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12. Category Ranking
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% Rank Cat Avg (Previous 5 Years)
41.4
19.2
55.2
51.8
55.4
20.4
18.8
61.8
39.2
46.8
22.6
24.6
18.8
21.4
28
Measures a fund’s total-return percentile rank
for the specified calendar year relative to all funds
that have the same Morningstar category.
Best rank is 1, lowest is 100.
Averaged over 5 years.

13. Explaining Morningstar “Super”
Sectors
• Cyclical
o Contents
• Basic Materials, Financial Services, Real Estate, & Consumer Cyclical
• Beta > 1
• Grow/Shrink with the economy
• Defensive
o Contents
• Food, Beverages, Tobacco, Household/Person products, etc.
• Less susceptible to recessions
• Sensitive
o Contents
• Communication Services, Technology, Energy, & Industrials
• Between Cyclical & Defensive
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14. Diversification, Weighting,
& Performance
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# of Stocks Highest Sector Weighting Second-Highest Sector Weighting Outperforming S&P
166 Sensitive: 42.23% Cyclical: 38.15% Yes
215 Defensive: 28.66% Sensitive: 26.37% Yes
103 Sensitive: 40.6% Cyclical: 34.7% Yes
33 Sensitive: 51.27% Cyclical: 42.3% No
59 Sensitive: 42.39% Cyclical: 41.24% Yes
53 Sensitive: 37.4% Cyclical: 32.5% Yes
68 Sensitive: 50.82% Cyclical: 29.68% Yes
36 Sensitive: 45.9% Cyclical: 41.7% No
65 Cyclical: 42.64% Sensitive: 38.63% Yes
665 Sensitive: 40.5% Cyclical: 38.4% No
53 Sensitive: 45.8% Cyclical: 40.0% Yes
53 Sensitive: 45.8% Cyclical: 40.0% Yes
20 Sensitive: 47.7% Cyclical: 37.8% Yes
20 Sensitive: 47.7% Cyclical: 37.8% Yes
3246 Sensitive: 41.9% Cyclical: 33.7% Yes

15. Top Performers
• Gold
o Fidelity Advisor Large Cap I
o ClearBridge Appreciation I
o Vanguard Total Stock Market Index I
• Aqua
o Oakmark I, II
o Oakmark Select I, II
• The “Worst”
o Artisan Value Fund Investor Shares
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