It’s rare for Morningstar’s Fund Manager Of The Year award to go to a manager who sub-advises on another company’s fund. Pimco’s Bill Gross, who also sub-advises for the Harbor Bond Fund, is a notable exception. So is Rajiv Jain of Vontobel Asset Management, who merited such recognition in 2012 for his role as a sub-advisor to the Virtus Foreign Opportunities and Virtus Emerging Markets Opportunities funds.

Sub-advised funds are offered by fund families who subcontract investment management of the fund to another firm. “About 9% of mutual fund assets are sub-advised, a constant over the last decade,” says Kenneth Beitler, manager of sub-advisory research at Strategic Insight, a market intelligence firm for mutual fund companies in New York City.

The leading fund families using sub-advisors include Vanguard, Harbor Capital, Pimco and John Hancock. Wellington is the leading sub-advisor, working with Vanguard, Hartford and Prudential, among others.

But not all sub-advised funds are created equal, an important consideration for investors when choosing funds. “Successful sub-advisory relationships are long-term partnerships instead of simply hired guns,” says Bridget Hughes, Morningstar’s associate director of fund research. “Vanguard’s success really stands out. Fees matter, and Vanguard has a really strong relationship with Wellington.”

She also lauds Vanguard’s use of multiple sub-managers. “This helps control risk,” she says, adding the same kind of due diligence that one would do on any other fund is still needed.

Hughes says the Hartford and American Beacon fund families have a demonstrated track record of success in offering sub-advised funds. Their common thread is the lack of internal active management research teams, which eliminates conflict of interest in choosing between an in-house team and an external manager.

Morningstar compiled a list of noteworthy sub-advised funds with strong performance records, reasonable fees, and a demonstrated history of sound fund governance and management that includes several Wellington managed Vanguard funds––Vanguard Dividend Growth (VDIGX), Vanguard Selected Value (VASVX) and Vanguard Wellington (VWELX). It also includes two funds sub-advised by Bill Gross––the Harbor Bond (HABDX) and Managers Pimco Bond (MBDFX) funds.

Others on the list include the Litman Gregory Masters International fund (MSILX), which uses multiple sub-advisors across international markets. The ASTON/Montag & Caldwell Growth fund (MCGFX) is managed by Montag & Caldwell, an Atlanta-based investment manager with a large-cap value bent whose focus on institutional accounts makes it difficult for retail investors to access.

It also includes the Virtus Foreign Opportunities (JVIAX) and Virtus Emerging Markets Opportunities (HEMZX) funds run by Rajiv Jain of Vontobel Asset Management, which manages European mutual funds and whose advisory services are available to American clients strictly through Virtus funds. Jain focuses on consumer stocks and the trends in emerging market consumer products.

These sub-advised funds have highly regarded managers and a strong due diligence process. Funds that have successful long-term relationships with sub-advisors have demonstrated their ability to navigate all types of markets, and do so with a sound partner and a strong process.