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May 06, 1997

Independent commentary on individual mutual funds

Columbia Common Stock

Type: Growth and income

Size: $578 million

Phone: (800) 547-1707

Sales charge: none

Morningstar rating: HHHHH

Total return: YTD: +7.5%

1996: +20.9%

1995: +30.8%

This fund's top-down approach has been especially accurate lately. Unlike most large-blend offerings, which put stock selection first, this fund starts from the top. Manager Alan Folkman begins by analyzing a wide range of political, economic, financial and market data to decide whether the growth- or value-oriented sectors have the best prospects. Late in 1996 Folkman grew concerned about the market's valuations and other factors, and decided to make the portfolio more defensive. He cut the fund's positions in the growth-oriented health and service areas [while] markedly increasing the portfolio's stakes in the value-oriented financial and energy sectors. Thanks to this shift, the fund is well ahead of most of its peers for the year to date. Such results aren't unusual for the fund and its top-down style. The accuracy of the fund's macro calls have enabled it to start and stay at the top.

--Bill Rocco for Morningstar, April 11


Pioneer Emerging Markets A

Type: Emerging markets

Size: $71 million

Phone: (800) 225-6292

Max. sales charge: 5.75%

Morningstar rating: not rated

Total return: YTD: +8.8%

1996: +17.8%

1995: +2.5%

Pioneer Emerging Markets' fund strategy is difficult to execute, but it's based on sound fundamentals. This fund won't get caught chasing hot-performing markets. Indeed, it's the one rushing to get out when its peers are rushing to get in. Manager Mark Madden believes that the best investment prospects are found in beaten-down markets where prices and sentiment appear to be at rock bottom, such as in India, Thailand and South Korea now. On the other hand, Madden won't touch Eastern Europe--mainly Russia--as he thinks that market's performance has far outstripped the underlying economic growth. The fund's rush to get out of soaring markets and into bottoming ones leads to high turnover and steep brokerage costs, creating both liquidity and timing issues. The fund has avoided these liquidity problems in practice, however, because it's usually selling into strength, when there are plenty of buyers, and buying into weakness. The fund has so far been less volatile than its average peer while turning in top-quintile performances in both 1995 and 1996.

--Kevin McDevitt for Morningstar, April 11


Invesco Select Income

Type: Mixed bonds

Size: $264 million

Phone: (800) 525-8085

Sales charge: none

Morningstar rating: HHHH

Current yld.: 7.18%

Total return: YTD: +1.3%

1996: +4.9%

1995: +20.6%

Invesco Select Income has been moving up the credit ladder, which isn't abnormal for an opportunistic approach. In recent years this fund has mostly shunned investment-grade corporate bonds in favor of U.S. government securities and bonds rated below BBB. Now, however, the fund holds close to one-fourth of assets in higher-quality bonds. This isn't a defensive move to upgrade the portfolio. Manager Jerry Paul hunts across the fixed-income spectrum for bonds that look relatively cheap. He currently finds bargains in certain investment-grade sectors, namely put-able bonds and electric-utility issues. The fund has flourished under Paul. It hasn't aggressively taken on more interest rate risk to try to boost returns. Rather, most of the fund's moderate risk and superior returns owe to competent credit research. Also, the fund has been operating in an investment climate that has favored taking some credit risk. This offering should appeal to investors who desire active fixed-income management with a good record.

--Kevin Kresnicka for Morningstar, April 11


Star ratings are risk-adjusted performance ratings on a scale of 1 to 5 (5 being the highest), based on at least three years of fund data, with greater weight given to five- or 10-year data if a fund has existed for that long. Funds less than 3 years old aren't rated.

These evaluations are excerpted from Morningstar Mutual Funds. More information about these or other funds can be purchased directly from Morningstar in print or software form. To inquire, call (800) 735-0700. To submit a fund for possible review in this column, write FUNDamentals, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053. Fax: (213) 237-7837. E-mail:

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