We regularly lament the fact that several hundred consistently four- and five-star funds have lost Morningstar analyst coverage over the years. Our almost-monthly feature “Left Behind by Morningstar” profiles a fund that once received analyst coverage but has now been ignored for five or more years. This month we profile Evermore Global Value (EVGBX / EVGIX), rated four-star for the past three years, past five years and overall. It’s a Euro-centric special situations fund run by David Marcus, whose roots are in the Mutual Series funds from the days of Michael Price’s reign. It’s both good and a good diversifier.

At the same time, we want to celebrate funds that have regained coverage. At the end of June, LSV Value Equity (LAEVX/LSVEX) received its first new analyst report since 2011. The LSV of LSV Value are the initials of three academics whose work on behavioral finance underlies the fund’s strategy: Josef Lakonishok of the University of Illinois, Andrei Schleifer of Harvard University, and Robert Vishny of the University of Chicago. Of those, only Dr. Lakonishok is actively engaged with the fund. At base, they discovered that most investors did predictably stupid things including getting excited about “story stocks” and shunning boring ones. It’s parlayed a combination of quantitative and fundamental screens into a series of consistently top-tier returns and a sizable lead over the S&P 500.

The Investor shares have a $1,000 minimum.

Morningstar also made some changes to their Prospects list, their roster of promising but not ready for prime time funds. They’ve added six funds to the list:

• Deutsche X-trackers USD High Yield Corporate Bond ETF (HYLB)
• Fidelity Growth Strategies (FDEGX), a $2.1 billion fund that’s been around since 1990. For the life of me I don’t see the attraction of the fund, but I presume that the Morningstar analysts see some movement under the surface that I’m missing.
• GMO SGM Major Markets (GSMFX), a $1.5 billion fund with a $10 million minimum.
• Oppenheimer Large Cap Revenue ETF (RWL), which weights the companies in the S&P 500 based on revenues rather than market caps.
• T. Rowe Price QM U.S. Small & Mid-Cap Core Equity (PRDSX), a $4.4 billion quant fund that’s been around since 1997. The fund size, and the total assets that the management team has to manage across all their charges, has grown dramatically which worries us rather more than it worries Morningstar.
• Western Asset Corporate Bond (SIGAX), a small, 35-year-old fund with markedly stronger performance over the past five years.

At the same time, the guys downgraded two funds; that is, they’re no longer Prospective: CRA Qualified Investment (CRATX) and Perkins International Value (JIFIX), now called Janus Henderson International Value. I suspect that the hit on International Value is that it’s not gathering enough assets ($52 million) to be worth following; the fund has earned four stars, which is rather more than most of the funds just added to the list can say. The CRA fund is a sort of socially-responsible bond fund, supporting projects qualified under the Community Redevelopment Act. It’s got about $2 billion and a three-star rating.

In an entirely admirable development, on July 24, 2017, Morningstar took a 40% equity stake in Sustainalytics, a firm that provides environmental, social, and governance (ESG) research and ratings. They’re the driver behind Morningstar’s sustainability grades for mutual funds, which you might notice on a fund’s profile page:

I’m not entirely sure what outcomes this will translate into, mostly because Morningstar CEO, Kunal Kapoor, talks like a CEO. After a short invocation of momentum and leverage and synergies, he concludes: “we look forward to continuing to meet the increasingly sophisticated ESG needs and requirements of our clients through integrated solutions and innovative research.”