Why We Upgraded These Fidelity Retirement Funds

Fidelity’s Freedom Blend and Advisor Freedom Blend target-date mutual fund series earned a People Pillar upgrade to High from Above Average in October. That boosted the overall Morningstar Medalist Ratings of most of the share classes of the series’ funds to Silver from Bronze; others moved to Bronze from Neutral, while the more expensive C and M share classes stayed Neutral.

The experience and number of people behind the funds drove the change. Managers Andrew Dierdorf and Brett Sumsion have nine years of experience together on Fidelity target-date strategies and draw on 31 researchers who test and tweak this series’ glide path construction and active allocations. For instance, in 2021, they introduced international sovereign bonds to the glide path and split its Treasury Inflation-Protected Securities allocation into more targeted short- and long-term exposures.

This series mixes some of Fidelity’s most impressive active and passive funds—almost 80% of the series’ underlying strategies get Morningstar Medalist Ratings of Bronze or better. The active/index mix is about 60%/40%, with managers from Fidelity’s wheelhouses—growth stocks and U.S. investment-grade bonds—assuming much of the active duties. The mix keeps costs down while offering a shot at outperformance.

Here are some other Morningstar Medalist Rating activity highlights from last month.

‘Unselected’

It’s been a rough decade for Davis Selected Advisors. Confidence in the team applying its eclectic, high-conviction approach has waned as many of its strategies have struggled; most of them ranked in the bottom half of their respective categories over the 10 years ended Oct. 31, 2023, and about half of them landed in the bottom fourth. The firm has a hallowed history and some admirable stewardship practices such as strong manager ownership, but the erratic performance, and decisions that precipitated it, contributed to a People Pillar downgrade to Average from Above Average for nearly all the firm’s analyst-covered strategies. That led to overall Medalist Rating downgrades of most share classes of Davis NY Venture, Global, and International; Clipper, Selected International, and Selected American; and Davis Select U.S. Equity ETF, Davis Select International ETF, and Davis Select Worldwide ETF. Davis Financial and its related exchange-traded fund still get Above Average pillar ratings and Silver Morningstar Medalist Ratings for the firm’s multigenerational expertise in picking financial stocks.

Solo Act

Akre Focus’ People and Parent ratings dropped to Average from Above Average because its advisor, Akre Capital Management, has fumbled a generational handoff. Since 2019, two comanagers who had taken over from founder Chuck Akre have left the firm. Remaining manager John Neff has a solid record but has struggled to attract and retain investment personnel. Neff has two relatively inexperienced analysts to help, but this is a lean team that relies a lot on one person to implement its unique, cash-flow-focused, low-turnover, high-conviction approach. The Medalist Ratings for each of Akre Focus’ share classes have dropped to Neutral from Bronze.

Losing Hart

The pending retirement of lead manager Clare Hart next year dropped the People Pillar rating for JPMorgan U.S. Value to Above Average from High. Successors Andrew Brandon and David Silberman have solid credentials and experience, but they are not Hart, who has an exceptional record here and at JPMorgan Equity Income. Hart will continue to work with Brandon and Silberman and the seasoned U.S. value team she built until she steps off in the fall of 2024. The Medalist Ratings of the fund’s share classes used to range from Gold to Silver, and now they stretch from Silver to Bronze—a notch lower but still a cut above most rivals.

Morningstar analysts Adam Millson, Andrew Redden, Katie Reichart, and Todd Trubey contributed to this report.