Fund Times: Vanguard Energy Reopens and Expands Team
Plus, new Fidelity fund, news at Third Avenue Value, and more.
On June 7, 2005 Vanguard Energy Fund (VGENX) reopened its doors after closing for five months to handle inflows. The fund's 2004 return topped 90% of the natural-resources sector fund category. Assets shot through the roof as a result, advancing from $2.4 billion at the end of 2003 to more than $5.3 billion when it finally closed in December 2004. Although the fund's performance hasn't cooled off--it has notched a top-quartile return, gaining 18% for the year-to-date period through June 9, 2005--it is taking other measures that will give investors access, without overburdening existing subadvisor Wellington Management.
As the fund continues growing, Vanguard's Quantitative Equity Group (QEG) will help existing Wellington manager Karl Bandtel, who will continue managing the bulk of the assets here (currently around $6 billion). QEG has shown aptitude managing portions of other Vanguard funds, most notably Vanguard Equity-Income (VEIPX), which it has helped direct since August 2003. Therefore, adding another manager and increasing the minimum initial investment to $25,000 should give the fund a fighting chance to remain solid for some time to come.
New Fidelity Fund Looks Familiar
Fidelity will launch a new fund, Fidelity International Small Cap Opportunities, per an SEC filing dated May 6, 2005. The fund, which will also come in Fidelity Advisor flavor, will invest across regions and countries in companies with market capitalizations of $5 billion or less. Andrew Sassine, who joined Fidelity as an analyst in 1999, will helm the new offering. Expenses for the no-load shares are expected to be 1.39%, which is lower than its typical foreign small/mid-growth category rival's 1.67%. The A share option will cost 1.73%, and is also lower than its typical rival's 2%.
Image Consultants At It Again
Armada Funds announced that effective June 13, 2005, they will rename their 25-odd funds Allegiant Funds. The change comes as part of an effort by its advisor, National City Investment Management, to consolidate branding for their asset management business within its three groups, National City Investment Management, Armada Funds, and Allegiant Institutional Services.
Instead of spending so much time and effort marketing, the fund company could find better uses of its time. For instance, we'd suggest the firm focus on crafting more compelling strategies and finding ways to retain quality investment talent. Turning around performance at some of their dreary funds would speak volumes more than any name change ever could.
Third Avenue Real Estate Value (TAREX) and Third Avenue International Value (TAVIX) will close to new investors effective July 1, 2005. The two funds will continue to allow investments from a few groups, such as current shareholders and participants in retirement plans that offer the funds. Although it's fairly unusual for a fund company to close an all-cap fund such as International Value at an asset level of only $1 billion, it's encouraging to see a firm that knows its limits.
In a supplement to a prospectus dated June 8, 2005, David A. Kiefer will no longer manage Jennison Utility Fund (PRUAX). He remains at Jennison, managing or comanaging Jennison Natural Resources (PGNAX), the fund he just moved to in April, Jennison Value (PBEAX), Jennison Blend (PBQAX) and Jennison 20/20 Focus (PTWAX). According to a company spokesman, the move to lighten Kiefer's load has been planned for the last 18 months. Jennison made longtime analyst Bobby Edemeka the comanager of the Utilities fund in January, so we don't view that fund as undermanned at this point.
In a prospectus dated June 6, 2005, Barclays Global Investors released details of its new exchange-traded fund, iShares Russell Microcap Index. The offering will track an index of U.S. micro-caps that contains 1,000 of the smallest companies in the Russell 3000 Index plus the next smallest 1,000 companies in the equity universe. The current market-cap range of that universe extends from $60 million to $550 million, which represents about 3% of the market capitalization of all listed U.S. equities. However, the fund doesn’t own all securities in the index, and instead uses a "representative sampling strategy" to try to track the performance of the index. Ed Corallo and Patrick O’Connor, who have both managed the S&P Index and Russell Index iShares ETFs for the past six years, will oversee the new fund. The expense ratio has not been determined at this time, although other similar small-growth offerings from iShares cost 0.25%.
More ETF news: In a preliminary prospectus dated June 8, 2005, Powershares is proposing three new ETFs that will track the Mergent dividend indexes. The first, Broad Dividend Achievers Index, will hold the 300-odd stocks in the index of the same name, which was constructed to get exposure to stocks with several consecutive years of dividend growth. The second, International Dividend Achievers, will ape a Mergent index of 48 stocks of non-U.S. companies that have grown their dividend payouts over several years. Finally, High Growth Rate Dividend Achievers, which will mimic an index of 100 stocks selected principally on the basis of their 10-year compound annual dividend growth rates. Not aiming to be the low-cost leader, the new funds are expected to charge 0.60%.
Vanguard Diversified Equity is now ready for purchase. As we announced in March 2005, this vehicle is a fund of funds that will assemble a portfolio of eight different Vanguard equity funds. Vanguard's Quantitative Equity Group will manage the asset allocation, and the expected weighted average cost of the funds will push its expense ratio to 0.44%.
Dieter Bardy does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.