"Notable shortfalls" in the way Wells Fargo's has brought together its recent acquisitions, and in the way it manages its multi-boutique culture, have led to Wells getting only a C-grade for stewardship with Morningstar.

In her article, fund-of-funds research director Laura Pavlenko Lutton notes that "Wells Fargo Advantage has grown into one of the nation's largest fund families, thanks in large part to a string of acquisitions and a handful of particularly successful funds. It has done a decent job caring for fundholders' capital. Many of its steward practices have improved over the past decade."

In particular she writes this about how Wells is herding its cats:

Wells Fargo Advantage continues to embrace a multiboutique structure, where investment teams--many of which are separated geographically--work autonomously. A multiboutique structure can be advantageous because established teams of money managers can employ proven investment strategies without unnecessary interference or distraction from the parent company. The same structure can present challenges, too. For example, some teams may have better resources than others or pursue decidedly different investment philosophies. And, often, some teams produce better relative returns than others. While this firm has no major flaws in its stewardship profile, its execution has been far from flawless.

Lutton gives Wells kudos for finding gems amongst its managers, and retaining them, but she expressed concern over uneven pricing and a handful of strategies, including: Special Small Cap Value (poor sell discipline) and Ultra Short Term Income (too risky) as well as Asset Allocation, which has "shortcomings, particularly around its expenses."

Read more about Lutton's analysis in Morningstar. 

Edited by: Tommy Fernandez


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