30 BARRON’S February 22, 2021
decisions drive performance, but low
fees—as in an average asset-weighted
expense ratio for Vanguard actively
managed bond funds of 0.11%—are
part of the equation. “In a low-yield
fixed-income environment, ultralow
expenses win the day,” Wiener says.
W
hereas Vanguard outsources
most of its fundamental equity
research, No. 4-ranked Fidelity
has one of the largest in-house re-
search departments in the business—
hundreds of equity and credit analysts
collectively calling the shots on most of
its $2.5 trillion in actively managed
assets. In a typical year, Fidelity’s re-
search team has more than 13,000
face-to-face meetings with
companies—a process that went vir-
tual in a matter of days last spring.
Tim Cohen, co-head of equity, says
that he and his colleagues look for-
ward to the time when they can kick
the tires in real life. For now, there are
positives. “As active managers, we
benefit from change,” Cohen says,
noting that collectively, Fidelity’s eq-
uity funds outperformed their bench-
marks by 8.9 percentage points.
Meanwhile, the virtual world makes
it possible to defy physics. “For all its
downside, there was at least one upside
in 2020: I was able to be in a few places
at one time,” says Sonu Kalra, manager
of the $40 billionFidelity Blue Chip
Growth(FBGRX). “For example, I
could attend health care, tech, and
consumer conferences—virtually—all
on the same day. That’s not possible if
you have to travel to California, New
York, and Florida.”
BecauseBarron’srankings are asset-
weighted, a firm tends to rank high
when its larger funds post strong relative
performance. That was the case for Ka-
lra’s fund, which returned 62% in 2020,
better than 98% of its peers. The same
was true of the $45 billionFidelity
Growth Company(FDGRX) which
returned 68%. Though it returned more
than 32% last year, Fidelity’s $132 billion
Contrafund(FCNTX) landed in the
bottom third of its peer group, detracting
from the firm’s overall score. Contra-
fund’s 2020 problem, in short, according
to manager Will Danoff’s letter to share-
holders: too muchBerkshire Hatha-
way(BRK.A) and not enough Apple.
On the fixed-income side, many of
Fidelity’s bigger contributors are part
of Fidelity’s Strategic Advisers series.
The funds aren’t available directly to
retail investors or through financial
advisors, but they are included in the
ranking because they are the basis of a
growing segment of separately man-
aged accounts, which are available
primarily through individual and
workplace retirement plans.
F
inally, No. 5-ranked Morgan Stan-
ley Investment Management made
its first appearance in the ranking
in 2019 and climbed the ranks—in a
big way—in 2020. The asset manage-
ment arm of Morgan Stanley has no
central investment research office or
chief investment officer calling the
shots. Rather, more than 20 autono-
mous teams specializing in a wide
range of public and private markets
manage $781 billion in assets.
In 2020, Morgan Stanley announced
that it would acquire Eaton Vance (No.
48) in a deal expected to close in the
second quarter of 2021. Given that there
is little overlap in focus areas—Eaton
Vance brings deep expertise in munici-
pal bonds and owns Calvert Research &
Management, a leader in sustainable
investing—it isn’t expected to dramati-
cally change how Morgan Stanley teams
manage money.
“We have a lot of diverse views, and
typically, smaller decision-making
groups tend to succeed,” says Dennis
Lynch, head of the Counterpoint
Global team, which manages about
$150 billion in 19 growth-oriented
strategies. And talk about succeeding:
Five of the mutual funds managed by
Lynch’s team returned more than
100% in 2020. Relative underperfor-
mance in 2019 (Morgan Stanley
ranked 47th last year) helped to sling-
shot results in 2020. “Many of our
companies were underappreciated
coming into 2020,” Lynch says. “And
many benefited from quicker [Covid
spurred] adoption of secular trends
already in their favor.”
The $20 billionMorgan Stanley
Institutional Growth(MSEQX)
returned 115%. Like many top per-
formers in 2020, it was an early in-
vestor in companies that benefited
from the sudden shift to all things
digital.Zoom Video Communica-
tions(ZM) andShopify(SHOP)
were two outsize contributors last
year. Similar themes played out in the
team’s other funds, includingMor-
gan Stanley Insight(CPOAX) and
Morgan Stanley Discovery
(MPEGX), which were up 116% and
142%, respectively, as well as small-
cap growth fundMorgan Stanley
Inception(MFLLX) and world
stock fundMorgan Stanley Global
Endurance(MSJSX).
Lynch says that Counterpoint
Global doesn’t invest in themes, but the
team does spend a lot of time thinking
about the impacts of secular trends.
Five members of the team are in charge
of researching “disruptive change”—-
areas that range from, say, artificial
intelligence to gene editing. The team
has long had a book club, and now that
Zoom is ubiquitous, it has started
inviting authors to join the online
discussions. Recent guests include
David Epstein, author ofRange,and
Abigail Marsh, author ofThe Fear
Factor.
Carving out time to think about big
ideas is important for long-term returns,
says Lynch, but so is making sure that
everyone is on the same page.B
Five-Year Ranking
Vanguard is overlooked as an active shop, but it has
$1.7 trillion in actively managed funds and strong
performance in most of them.
10-Year Ranking
Vanguard and Virtus claim the top two spots on both
the five-year and 10-year ranking, thanks to solid
performance across all categories of funds.
Weighted
Rank Family Score1 Vanguard Group 75.092 Virtus Investment Partners 72.673 Pimco 70.694 Lord Abbett 69.305 Fidelity Management & Research 67.326 MFS Investment Management 67.257 T. Rowe Price 65.098 BlackRock 65.009 Columbia Threadneedle Investments 64.6310 PGIM Investments 64.0811 Nuveen 63.2112 Thrivent Mutual Funds 62.3313 Natixis Investment Managers 62.1414 Putnam Investment Management 62.0015 Manning & Napier Advisors 61.3416 Hartford Funds 60.8017 Transamerica Asset Management 60.3618 Guggenheim Investments 60.1719 Wells Fargo Funds 59.4520 Federated Investors 58.3921 Principal Global Investors 57.7822 American Funds 57.5723 J.P. Morgan Asset Management 57.5224 John Hancock 57.2325 Amundi Pioneer Asset Management 54.7526 DWS Group 54.5627 American Century Investment Mgmt 53.3828 Affiliated Managers Group 52.9529 Franklin Templeton Investments 52.2830 MainStay Funds 51.3031 BNY Mellon Investment Management 50.7632 Ivy Investment Management 49.8033 Goldman Sachs Asset Management 49.5434 Dimensional Fund Advisors 49.5235 Delaware Management 49.2236 AllianceBernstein 48.2637 Eaton Vance 48.1838 Invesco 47.6339 Saratoga Capital Management 47.4340 AssetMark 46.8541 Victory Capital Management* 46.5042 SIT Investment Associates 46.1143 SEI Group 45.6044 Neuberger Berman 44.8045 USAA Investments* 43.7846 UBS Asset Management 42.8847 State Street Bank & Trust 42.5748 Northern Trust Investments 41.8249 BMO Asset Management 40.2850 Russell Investments 37.77Weighted
Rank Family Score1 Vanguard Group 83.582 Virtus Investment Partners 76.813 Putnam Investment Management 72.454 T. Rowe Price 71.715 Pimco 69.996 MFS Investment Management 69.397 Hartford Funds 67.678 BlackRock 67.249 Nuveen 67.0810 Columbia Threadneedle Investments 65.2411 Principal Global Investors 64.4812 John Hancock 64.3213 Fidelity Management & Research 63.7514 PGIM Investments 63.3815 J.P. Morgan Asset Management 62.2416 Wells Fargo Funds 61.8717 Thrivent Mutual Funds 61.7218 American Funds 61.2719 Federated Investors 60.7420 DWS Group 59.5721 Lord Abbett 58.5422 Amundi Pioneer Asset Management 58.0623 Delaware Management 57.8824 AllianceBernstein 56.7325 Victory Capital Management* 56.4826 Goldman Sachs Asset Management 56.0427 Franklin Templeton Investments 55.2228 MainStay Funds 53.9829 Guggenheim Investments 53.5630 Ivy Investment Management 53.0531 Eaton Vance 52.1732 American Century Investment Mgmt 51.9033 Invesco 51.8134 Dimensional Fund Advisors 51.7535 Neuberger Berman 51.0136 USAA Investments* 50.5937 Affiliated Managers Group 49.4638 State Street Bank & Trust 49.0339 BNY Mellon Investment Management 48.6340 Northern Trust Investments 47.7741 UBS Asset Management 46.9142 SEI Group 45.9243 Manning & Napier Advisors 36.6544 Russell Investments 30.44*Victory Capital acquired USAA in July of 2019, but the fund families are
ranked separately. Source: Refinitiv Lipper