Fund Times: The ETFs Keep Coming
Plus, news on Columbia, Fidelity, the ICI, and more.
State Street has filed plans for 15 new exchange-traded funds in its StreetTracks family. The offerings include new large-cap, mid-cap value, mid-growth, mid-blend, and small-cap ETFs, as well as sector ETFs focusing on the banking, capital markets, and insurance industries. And of course, to cash in on the dividend craze, the firm is also launching a dividend-stock ETF. It joins the huge iShares Dow Jones Select Dividend Index (DVY), which has attracted more than $7.3 billion in assets in less than two years, and PowerShares HighYield Dividend Achievers (PEY), which has gathered almost half a billion dollars in assets since its December 2004 release.
The style-based indexes track the Dow Jones Wilshire bogys of the same name and round out StreetTracks' investment-style-based lineup. The financial-industry ETFs track benchmarks created by Keefe, Bruyette & Woods Inc., and are all concentrated portfolios holding just 24 stocks. The SPDR Dividend ETF will track S&P High Yield Dividend Aristocrats Index (the "Dividend Index"), which includes the 50 highest-yielding S&P Composite 1500 constituents that have increased their dividends every year for the past 25 years.
The new ETFs will bring the StreetTracks family to 22 and State Street's overall stable of ETFs to 31 by Morningstar's count. (The SPDR, Select Sector SPDRs, and SPDR O-Strip also belong to State Street.)
Managerial Changes at Columbia
Several fund offerings of Boston-based Columbia Management Advisors are undergoing managerial changes, as the firm keeps remaking its fund lineup following the group's merger with Nations Funds. The changes include a switch at Columbia Disciplined Value (LEVAX), where Vikram Kuriyan is replacing Michael Welhoelter, who had run the fund since early 2003. Kuriyan, a quantitative analyst with five years of experience at Columbia, does not have experience running a public mutual fund. However, as he has worked closely with Welhoulter in the past, we do not expect dramatic changes to the strategy, which uses a combination of quantitative and fundamental analysis to make measured bets against the Russell 1000 Value Index. Our main gripe here are the fund's fees, which are tough to overcome with its strategy.
Kuriyan will also be taking over the moderate-allocation offerings Columbia Liberty (COLFX) and Columbia Asset Allocation (LAAAX), where he will be joined by Karen Wurdack, an analyst on his current quant team. Former manager Harvey Hirschhorn will continue working on asset allocation for institutional and private bank clients, but will not make any decisions for this fund. Neither fund has been an attractive option, as both are relatively expensive and have underperformed.
We reported in last week's edition of Fund Times that the Investment Company Institute (ICI) would no longer represent fund shareholders, per a Reuter's news item. However, ICI president Paul Schott Stevens sent a memo to members last week denying a change in direction for the ICI. The memo stated, "The notion that there's been some change in our mission or objectives could not be further from the truth." Stevens also said, "We are not an organization whose membership includes investors or shareholders as such, and in this sense we do not and cannot claim to represent them." Whatever the case, as we've said before, it's too bad that ICI dues are typically paid by fundholders and not the investment firms the ICI is made up of.
Although closed to new investors, American Beacon Small Cap Value (AVPAX) is trying to add capacity to deal with inflows of money from current shareholders by adding three new subadvisors to the fund. Dreman Value Management, Metropolitan West Capital Management, and SSgA Funds Management join Barrow, Brandywine, Hotchkis, Opus, and The Boston Company to bring the total number of subadvisors to eight. The fund has enjoyed good long-term performance, but we wonder if too many cooks will spoil this broth.
Manager John L. Keeley, Jr. is moving into mid-cap territory with the launch of Keeley Mid Cap Value. Keeley hopes to duplicate the good long-term performance of his small-cap fund, Keeley Small Cap Value (KSCVX), by utilizing the same unique, contrarian strategy of buying well-managed but overlooked companies undergoing spin-offs, bankruptcies, and other corporate restructurings. We like Keeley's experience and success but are troubled by the fund's initial expense ratio of 2.0%, which is 25% higher than its typical mid-cap value category peers.
Fidelity Select Computers (FDCPX) has named James Morrow as its new manager. He replaces Naved Khan who's tenure managing the fund only began in January 2005. Morrow joined Fidelity in 1999 as a research analyst, and now manages Fidelity Select Electronics (FSELX) and Fidelity Select Technology (FSPTX). Because of these sector funds' narrow focus, they tend to be more volatile than diversified offerings. Therefore, for almost all investors, we think a broader tech fund is a better choice.
Dieter Bardy does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.