Fund Times: PIMCO Launches New Funds, Fidelity Cuts Fees
Plus, new Oppenheimer fund, news at Merrill Lynch, and more.
In an SEC filing dated June 15, 2005, Pacific Investment Management Company (PIMCO) announced the launch of three new mutual funds. The first two funds will track a new index named the RA Fundamental 1000 Index based on research from Financial Analyst Journal editor in chief Rob Arnott (who also manages PIMCO All Asset (PASDX)). The index tracks the 1,000 largest public U.S. companies, and instead of weighting stocks according to market capitalizations as the S&P 500 does, the RA Fundamental 1000 weights positions via a combination of factors, such as sales, cash flow, book values, and dividends. The funds seek to replicate the underlying index by investing in derivatives rather than the actual stocks, using the cash balance collateral to purchase short-term fixed-income securities. PIMCO Fundamental Index Plus Fund will invest this collateral in bonds with an average duration between zero and one year. The more aggressive PIMCO Fundamental Index Plus TR Fund will invest in bonds with a duration between one and six years. PIMCO has already demonstrated success using similar strategies at PIMCO StocksPlus (PSTKX). That fund tracks the S&P 500 and uses a comparable methodology to beat its index. The funds are expected to cost 0.90% and 0.99%, respectively, for the administrative share classes.
Finally, the third fund, PIMCO Developing Local Markets, is to be managed by Michael Gomez. The latter will invest in non-U.S. currency and bonds with a maximum duration of eight years, and will cost 1.2% for the administrative share class, in line with its typical world-bond peers.
Chop, Chop, Chop
Continuing its recent fee wars, Fidelity agreed to voluntarily cap expenses on five different funds. The expense ratio of Fidelity International Real Estate (FIREX) will be capped at 1.25% from the previous 1.5%; Fidelity Advisor Small Cap Growth (FCAGX) and Fidelity Advisor Small Cap Value (FCVAX) will drop to 1.4% from 1.5% on the A shares; and the no-load Fidelity Small Cap Growth (FCPGX) and Fidelity Small Cap Value (FCPVX) will be cut to 1.15% from 1.25%.
New Oppenheimer Fund
Oppenheimer will launch a new fund of funds called Oppenheimer International Diversified Fund, per an SEC filing dated June 9, 2005. The fund will invest in seven underlying Oppenheimer funds: Developing Markets (ODMAX), Global Opportunities (OPGIX), International Bond (OIBAX), International Growth (OIGAX), International Small Company (OSMAX), International Value (OIVAX), and Quest International Value (QIVAX). The underlying funds currently invest 95% of their stocks in non-U.S. holdings. (Since this is a preliminary prospectus, there was no expense information available.)
Missing from the mix of funds is arguably one of Oppenheimer's finest and largest international offerings, Oppenheimer Global (OPPAX), managed by Bill Wilby. With an asset base approaching $12 billion in the retail share classes, this may be an indirect admission that it's getting too big. On a related note, two of the other underlying funds, Quest International Value and International Value, are essentially clones of one another. It seems redundant to place them both in the portfolio.
We're not too thrilled with the quality of the new advisor that they've selected. Munder runs approximately 22 funds, and two of them, Munder Future Technology (MTFAX) and Munder Internet (MNNAX), focus on technology. Our negative opinion rests on the terribly volatile poor performance and excessive personnel turnover at the firm. Additionally, Amerindo's board didn't negotiate a very good cost structure. The management component alone is 1%, on the high side for technology funds.
Gabelli's board voted to eliminate redemption fees on all the Westwood funds except Westwood Mighty Mites (WEMMX) and to reduce the holding period requirement from 60 days to seven days. They made the decision because the SEC hasn't come out with any policies on redemption fees and because they say they aren't having problems with rapid trading or market-timing. We're not sure that this move is in the best interest of shareholders.
Merrill Lynch's European equities group has lost two veteran portfolio managers. Hu Aarts and Greg Hopkins comanaged Merrill Lynch EuroFund (MDEFX) and contributed to Merrill Lynch International Value (MDIVX). James MacMillan, head of the European equities team and lead manager of International Value, will assume management responsibilities at Eurofund.
The Loomis Sayles Board lowered the management fee for two funds per a prospectus supplement released June 16, 2005. The new fee is 0.25%, instead of the previous 0.30% for Loomis Sayles Intermediate Duration Fixed Income (LSDIX) and Loomis Sayles Inflation Protected Securities (LSGSX). The total expense ratio was already below average for both funds, but it's great to see the board continue to further work on behalf of shareholder's best interests.
It appears that the Chris Lahiji era at Frontier Equity (FEFPX) has come to an unceremonious end. The 21-year-old former manager no longer shows up on the updated prospectus. That continues a trend that has seen Lahiji's profile gradually lowered from wunderkind to manager to analyst.
Dieter Bardy does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.