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15 Big Fund Upgrades and Downgrades
We have modified our Morningstar Medalist ratings to a simplified structure with fewer moving parts. In a previous fund spy, I looked at its impact on the largest funds.Our prior methodology looked at past returns and their variance to infer alpha potential and then adjusted ratings accordingly. So, a category that had greater alpha potential would be more tolerant of higher fees, and one with a low alpha potential would have lower ratings. There’s good logic there, but it did end up being quite harsh in some areas with good funds where indexing isn’t a practical solution or the market isn’t that efficient. Under the new methodology, some funds with strong fundamentals are getting upgrades. Fees are still important. The highlighted upgrades are all cheaper than the downgrades. Thus, the playing field is now a little more even.Target-Date FundsTo me, target-date funds are one of the industry’s great success stories. They offer low-cost exposure to great funds and a glide path that adjusts investors’ asset mix as they approach their target retirement date. Yet it was very rare for these funds to get Gold ratings because returns tended to bunch in a fairly tight band as many of the weaker and wackier players were weeded out.T. Rowe Price Retirement 2030 TRRCX earned High pillar ratings across the board because it had both strong underlying funds and an excellent glide path team. The fund’s retail share class charges 0.55%. That’s a hair cheaper than average, so under the new methodology it earned a 0.19 price score and an overall 1.46 score, elevating the fund to Gold from Bronze. American Funds 2030 Target Date Retirement Fund AAETX charges 0.66% and has three High pillar ratings. It goes all the way to Gold from Neutral. Despite a -0.04 fee score, it gets a 1.27 overall score thanks to High People, Process, and Parent ratings. Fidelity Freedom 2035 FFTHX has gone to Silver from Neutral. It has Above Average Parent and Process ratings and a High People rating. With a 0.64% expense ratio and -0.36 fee score, it clocks in at an overall score of 0.91.Bank LoansBank-loan funds require credit research and liquidity management, so indexing isn’t a great choice here. Thus, I was pleased to see Fidelity Floating Rate High Income FFRHX and T. Rowe Price Floating Rate PRFRX upgraded to Gold from Bronze. Both earn High People and Process ratings and respective Above Average and High Parent ratings. The funds have similar fees: 0.76% for T. Rowe and 0.73% for Fidelity. That leads to similar overall scores of 1.59 and 1.6, respectively. MunisMunicipal bond funds are also getting some welcome upgrades. Fidelity Intermediate Municipal Income FLTMX is going to Gold from Bronze thanks to its low 0.37% fee and its High Process and Above Average People ratings. Its 1.32 price score leads to a 1.41 overall score.Allocation FundsT. Rowe Price Global Allocation RPGAX and T. Rowe Price Spectrum Conservative Allocation PRSIX received upgrades to Silver and Gold, respectively, from Bronze. Global charges 1.02%; that’s actually above average, but having High ratings for Parent and People, plus an Above Average Process rating, nudges it to a 0.97 score. T. Rowe Price Spectrum Conservative Allocation has a much cheaper fee of 0.67%, giving it a 1.0 price score, a 1.39 overall score, and a Gold rating.DowngradesNow let’s look at some higher-fee funds for which our prior model was more forgiving, but are now going down a notch. Many of these are in emerging markets and small and mid-caps. You’ll notice that all these examples have negative price scores. That means their higher-than-category-average expense ratios are cutting their ratings.Emerging MarketsInvesco Asia Pacific Equity ASIAX is going down to Neutral from Silver though its cheaper shareclasses still earn a medal. Its 1.43% expense ratio gave it one of the worst price scores I’ve highlighted: -1.55. We give it a High for Process and Above Average for People, and Average for Parent; so, besides price, the underlying fundamentals are pretty appealing.GQG Partners Emerging Markets Equity GQGPX is coming down to Silver from Gold. We rate it High for People and Process, and Above Average for Parent. Fees are a little above average at 1.18%, but it has a -0.67 price score. I own this fund as I’m a fan of manager Rajiv Jain, though I’d love to see fees come down.Small Caps and Mid-CapsBaron Small Cap BSCFX and Baron Asset BARAX are coming down to Bronze from Silver. They charge 1.32% and 1.31%, which is kind of pricey for their categories, and both get a significant penalty for it. On the plus side, we rate the Process High and People Above Average.Harbor Mid Cap Value HIMVX is coming down to Bronze from Silver. The fund’s small $420 million asset base is partly responsible for its 1.2% expense ratio. That fee gets it a -1.32 penalty in our new methodology.LSV Small Cap Value LVAQX is a good quantitative fund, but its above average 1.08% expense ratio takes its rating to Silver from Gold. As the High People and Above Average Process ratings indicate, there are some strong fundamentals behind the fund.Finally, Victory Sycamore Small Company Opportunity SSGSX is coming down to Bronze because it suffers a -0.99 price score penalty on account of its 1.23% expense ratio. We rate it High for People and Above Average for process.ConclusionOur new methodology should produce more transparent and stable ratings, which I hope makes using them easier for investors.
2 Top-Performing Mid-Cap Growth Funds
Mid-cap growth stocks can be riskier than the largest stocks in the market, but they can also come with bigger growth opportunities. A mid-cap growth fund can offer easy exposure to a diversified array of fast-growing mid-cap stocks. Among the largest names are semiconductor firm SanDisk SNDK, communications and radio infrastructure company Motorola Solutions MSI, and cruise company Royal Caribbean. To screen for the top-performing funds in this category, we looked for those with the best returns over the last one-, three-, and five-year periods. Both names that passed the screen are actively managed. These funds come with high-conviction Morningstar Medalist Ratings of Silver and Gold.Invesco Discovery Mid Cap Growth Fund OEGIXPrimeCap Odyssey Aggressive Growth Fund POAGXSome of these portfolios invest in stocks of all sizes, leading to a mid-cap profile, while others focus on midsize companies. Mid-cap growth portfolios target US firms projected to grow faster than other mid-cap stocks, and which therefore command relatively higher prices. The US mid-cap range represents 20% of the total capitalization of the US equity market. Growth is defined based on fast growth (high growth rates for earnings, sales, book value, and cash flow) and high valuations (high price ratios and low dividend yields).Over the past 12 months, the average fund in the category returned 18.62%. On an annualized basis, these funds have climbed 13.69% over the past three years and 2.32% over the past five. Meanwhile, the Morningstar US Market Index has risen 29.64% over the past 12 months, 21.06% per year over the past three years, and 11.66% per year over the past five.Screening for the Top-Performing Mid-Cap Growth FundsTo find the best mid-cap growth funds, we looked at returns from the past one, three, and five years using Morningstar Direct. We screened for open-end and exchange-traded funds in the top 33% of the category using their lowest-cost primary share classes for those periods. We also filtered for funds with a Morningstar Medalist Rating of Bronze, Silver, or Gold. We excluded funds with assets under $100 million and analyst coverage that was not 100%. This left two investments.Because the screen was created with the lowest-cost share class for each fund, some may be listed with share classes that are not accessible to individual investors outside of retirement plans, or they may be aimed at institutional investors and require large minimum investments. The individual investor versions of those funds may carry higher fees, reducing returns to shareholders. Medalist Ratings may differ among the share classes of a fund.Invesco Discovery Mid Cap Growth FundMorningstar Medalist Rating: SilverMorningstar Rating: ★★★★This $6.5 billion fund has gained 35.01% over the past year, while the average fund in its category is up 18.62%. The Invesco fund, launched in February 2013, has climbed 17.86% over the past three years and 5.21% over the past five.Invesco Discovery Mid Cap Growth’s proven, experienced management team and sound approach make it an appealing option. This strategy has an impressive history, although it doesn’t look quite as good when measured against its tough-to-beat Russell Midcap Growth Index prospectus benchmark as it does against its mid-growth Morningstar Category peers. Over the trailing 15-year period through May 2025, the 12.8% annualized return of the mutual fund’s Y shares landed behind the index’s 13.5% gain but was significantly ahead of the category average. The story is similar over the trailing 10-year period: The Y shares lagged the index by about 1 percentage point while topping the group norm by about the same amount. A few recent years help explain the shortfalls versus its benchmark. The strategy usually outperforms in downturns, but that didn’t happen in 2022’s dismal market, and the following year its 13.2% gain was barely half the index’s rise. After a strong showing in 2024, the fund again lagged in 2025 through May, owing partly to an underweight position in the index’s top constituent at the time, Palantir Technologies, which has been on an incredible tear.Despite the recent disappointments, the people in charge of this strategy instill confidence. Manager Ron Zibelli and comanager Justin Livengood have worked together since 2002 along with Ash Shah, Zibelli’s comanager on small-cap focused Invesco Discovery, which has an excellent long-term record. Two of the four other analysts have been with this team for roughly 20 years each.The team has used a consistent strategy for many years that balances a growth focus with risk controls. Zibelli and Livengood are willing to pay up for especially promising companies, so that the fund’s average valuations tend to be higher than those of its peers. But the managers prefer firms with solid business models and keep individual stock weightings below 3%, which has helped them avoid major blowups.Gregg Wolper, senior analystPrimeCap Odyssey Aggressive Growth FundMorningstar Medalist Rating: GoldMorningstar Rating: ★★★★Over the past year, the PRIMECAP fund rose 43.38%, while the average fund in its category rose 18.62%. The fund, launched in November 2004, has climbed 20.15% over the past three years and 7.20% over the past five.Primecap Odyssey Aggressive Growth continues to benefit from its outstanding investment team and low fees. This mid-growth fund is one of six mutual funds overseen by Primecap Management that stands out in many positive ways. The firm is mindful of company valuation, prizes unconventional thinking, and pursues stocks off the beaten path. The firm is also unique for its extreme patience. It often holds stocks for a decade or more, a rare trait that can pay off when it backs firms with competitive moats, rising earnings, or skilled leadership. Top holding Eli Lilly is a case in point. A long-term orientation also works when a company suffers a steep share-price drop, but its troubles are fixable and fleeting.But patience has been a double-edged sword for Primecap, whose convictions have sometimes hardened into obstinacy, even as investment theses flopped. Corporate executives can prove themselves poor stewards; rivals sometimes erode once-mighty franchises; companies’ sales slide; debt piles up; or a bargain-basement takeover ends the growth story that Primecap was banking on. In these cases, holding firm becomes damaging as the stocks’ prices fall and potential gains elsewhere are foregone.Mistakes like these explain much of the firm’s lackluster returns over the past five years. It has also faced some stylistic headwinds, with a contrarian bent that has lagged in a market enthralled by momentum. Even so, the firm’s longer-term track record is admirable, helped by its research-focused culture and competitive pricing of its funds. For investors seeking a differentiated approach to growth investing, this fund remains a worthy holding.Robby Greengold, principal
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JPMorgan executive says one thing is keeping AI in check
AI is vastly changing how we work, shop and even think. Companies are taking note: nearly 78% have adopted some form of AI technology, according to Hostinger.While the average American uses AI for things like chatting and answering questions, the technology is continuing to advance and become far more autonomous.And while it’s still in the early days, banks and insurers are using these new AI models to make their jobs easier. But the technology is advancing so fast that it could soon become completely autonomous without this one thing.The Wall Street race towards agentic AIDuring a panel at Sas Innovate 2026 on agentic AI use at banks and insurance firms, experts said there is only one thing preventing AI from becoming fully autonomous. Agentic AI differs from other types of AI in that it can act somewhat autonomously. Rather than respond to prompts, as in the case of ChatGPT and other LLMs, an AI agent needs very little oversight and instructions to complete a goal, according to IBM.Banks have been very open about embracing AI use. Around 85% are already using AI in some form, according to McKinsey and Company.Banks using agentic AICitibank has rolled out an internal AI platform called Arc that lets employees create AI agents, Axios reported. The bank already uses AI to create a customized experience for its wealth customers, TheStreet reported.JP Morgan Chase has been embracing AI agentic use and it’s currently being used in the workflow of 80 services across the company, according to IT Brew.Wells Fargo partnered with Google in 2025 to build up its agentic AI in the workplace, Google stated.Banks are using AI to make their workload easier by automating menial and time-consuming tasks, said Adolfo Lopez, senior vice president of corporate technology at JPMorgan Chase during a Sas Innovate panel.“Most of the work that is being done with agentic AI is assistant or delegative…it’s not completely autonomous at this point,” he said.But even as Wall Street races to be at the forefront of agentic AI, it is doing so with caution.
As AI use increases, so too does the demand for energy and water. Shutterstock
AI guardrailsAI use is not without controversy. For one, there are the vast amounts of water and energy used to keep data centers supporting AI use, according to MIT News. Banks have also been warned about a new model from Anthropic which poses a cybersecurity risk, TheStreet reported.Lopez said that AI could be a lot more advanced were it not for the guardrails that have been put in place. Banks like JP Morgan have to think about their reputation, he added.“It’s the regulations that constrain us, because we have to be very careful with what we do,” he said during a panel discussion.More bank newsThis major bank is going on a branch-opening spreeThis fintech firm is replacing their workers with AIBank of America goes all in on controversial tech“Technology will allow us to leverage AI and make decisions, but should it? Should we allow that? From a regulatory and controlled perspective, no, there are certain areas that we should avoid,” Lopez said.Most importantly, he said, humans still need to stay in the loop of any decision-making, at least until we can trust AI agents.“Its confidence and decision making has to be earned, just like any other individual. It’s another employee, for that matter. Can it perform? Can it be trusted? And the human has to be in the loop until that point it earns your trust,” he said.Related: JPMorgan has a stark message on climate change
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