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Principal’s Complex Growth Plan Reveals a Muddled Culture

Principal Funds continues to grow on multiple fronts, but its core identity remains elusive.

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Morningstar recently issued a new Stewardship Grade for Principal Funds. The firm's overall grade--which considers corporate culture, fund board quality, fund manager incentives, fees, and regulatory history--is a C. What follows is Morningstar's analysis of the firm's corporate culture. This text, as well as analytical text on the other four Stewardship Grade criteria, is available to subscribers of Morningstar's software for advisors and institutions: Morningstar Advisor Workstation(SM), Morningstar Office(SM), and Morningstar Direct(SM).

Principal Funds’ leadership remains steadfast in its multiyear effort to establish its identity as a top-tier asset manager. The firm has begun to see the fruits of this effort as its stake in open-end mutual fund assets has grown to approximately $110 billion as of Dec. 31, 2014, placing it among the largest U.S.-based fund families in terms of assets under management. The firm has doubled its mutual fund assets since the end of 2010, bolstered through market appreciation and inflows. While the firm’s growth is apparent, it’s not clear whether Principal Funds can carve out a distinct identity within its storied parent company and an ultracompetitive industry.

Jeff Holt does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.