Fund Times: Openings, Closings, & Manager Changes
AXP, Fidelity, Evergreen, Nuveen, and others.
American Express Financial's (AXP) existing value mutual funds need help and they may have found it in some proven bargain bloodhounds. The financial firm's AXP fund family plans to inaugurate a new stable of subadvised offerings with proven entities like Chris Davis of Selected American (SLASX) and Martin Whitman of Third Avenue Value (TAVFX) at the helm. Also, Fidelity Investments, which already has five funds specializing in health-care equities, plans to start a new sector fund focusing on drug-company stocks.
Investors looking for a good value mutual fund--one that buys stocks that look cheap compared with measures such as earnings, cash flow, or book value--have not had much of a selection at American Express' AXP funds. The family's two existing funds, AXP Equity Value (INEGX) and AXP Diversified Equity-Income (INDZX), have lagged their large-value category peers badly for most of the last decade. But better choices may be on the way, according to filings with the Securities and Exchange Commission. In June American Express will roll out three new value funds run by outside managers whose names have become synonymous with value investing. The funds will be part of a new line of subadvised, broker-sold funds, dubbed AXP Partners Funds, that American Express plans to offer, said Morningstar analyst Bradley Sweeney.
Davis and his comanager from Selected American, Davis Financial (RPFGX), and Davis NY Venture (NYVTX), Ken Feinberg, will run AXP Partners Fundamental Value Fund, which will be a large-cap value fund. On average, the annual returns of all five funds Davis and Feinberg have run together have beaten their peers and the S&P 500 over the last five years. Two of their charges, Selected American and Davis Financial, are Morningstar analysts' picks.
Brian Rogers, manager of T. Rowe Price Equity-Income (PRFDX) and T. Rowe Price Value (TRVLX), will operate the new AXP Partners Value Fund with a manager to be named later from Lord Abbett. The long-term records of both of Rogers' funds are better than three fourths of their peers'.
Veteran vulture investor Martin Whitman, whose Third Avenue Value fund is one of Morningstar's favorite small-value offerings, and Chuck Royce, whose Royce Total Return fund (RYTRX) also is an analysts' pick, will run AXP Small Cap Value Fund.
Fidelity has got the drug bug. The Boston-based company plans to offer Fidelity Select Pharmaceuticals later this year, according to documents filed with the SEC. The new fund will focus on companies that research, make, sell, or distribute drugs of all types. Presumably the fund will give investors a pure shot of the drug industry, but much of that ground is already covered by Fidelity's five other health-care-related sector funds: Fidelity Advisor Health Care (FACDX), and Fidelity Select Biotechnology (FBIOX), Health Care (FSPHX), Medical Equipment/Systems (FSMEX), and Medical Delivery (FSHCX). For example, all these funds except Medical Equipment have owned Bristol-Meyers Squibb (BMY), Johnson & Johnson (JNJ), Schering-Plough (SGP), and Immunex (IMNX) in the last year, according to the most recent portfolio information in Morningstar's database. The new Pharmaceuticals portfolio will have an expense ratio of 1.37% and, like all select portfolios, will carry a 3% initial sales charge.
Continuing its expansion into the exchange-traded fund field, Nuveen Investments (JNC) has introduced six exchange-traded municipal-bond funds that will trade on the American Stock Exchange. Counting the new funds--which include Nuveen Dividend Advantage Municipal Fund 2, Nuveen California Dividend Advantage Municipal Fund 2, and similarly named offerings for New Jersey, New York, Ohio, and Pennsylvania--Nuveen now has 13 funds that trade like stocks on Amex.
Dallas-based online mutual-fund seller Mutuals.com plans to offer five funds of funds that will try to take advantage of demographic-driven investment trends touted by pundit and author Harry Dent Jr., according to SEC documents. Mutuals plans to roll out the Generation Wave Aggressive, Growth, Alternative Growth, Balanced Growth, and Conservative Growth funds, which will try to employ Dent's theories on the effect of the aging baby boomer generation on the economy and stock market. Dent, author of vigorously optimistic books The Great Boom Ahead and The Roaring 2000s, is a member of Mutuals.com's advisory board. In 1999 Dent helped AIM Capital Management create the AIM Dent Demographic Trends Fund (ADDAX), which uses similar strategies to pick stocks. The $1.2 billion-in-assets fund has lost 49% of its value in the last year, worse than 86% of its large-growth peers.
The Principal Preservation Portfolios fund family has renamed itself North Track Funds and introduced two new index funds. The Dow Jones U.S. Healthcare 100 Plus Fund and Dow Jones U.S. Financial Services 100 Plus Fund will be available in April.
The Evergreen Funds family has hired Jerome Heppelmann, manager of the PBHG Mid-Cap Value (PBMCX), Small-Cap Value (PBSVX), and Focused Value (PBFVX) funds, and Ray McCaffrey, manager of PBHG Large Cap Value (PLCVX), to take the place of the Evergreen Capital Growth Fund (ECPGX) management team, which abruptly left this month to pursue other interests, an Evergreen spokesman said. At least one member of the Capital Growth team, John Davenport, will stick around until April to smooth the transition for Heppelmann, who will continue running his PBHG funds. Evergreen chose Heppelmann and McCaffrey because it thought they could run the portfolio in the same concentrated, valuation-conscious style that has made Capital Growth better than 89% and 96% of its category over the last three and five years, respectively, said Morningstar fund analyst Christopher Davis. Heppelmann has guided his PBHG mid- and small-cap funds to the top of their categories. Focused Value, however is trailing more than 80% of its mid-cap value peers. McCaffrey has been at the helm of PBHG Large Cap Value since the middle of 1999. Over the last year the fund has been better than 97% of its peers.
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Dan Culloton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.