Fund Times: Vanguard Warns on Energy as LA Funds Hold Tight
Plus a prominent T. Rowe Price manager will retire in 2006.
Vanguard Warns on Energy
Vanguard went the extra mile and posted an educational piece on their Web site warning investors to be wary of buying energy funds now. As everyone is well aware, energy prices have had a tremendous run recently. And as the article pointed out, Vanguard Energy (VGENX) has gained more than 50% over the trailing year ending Sept. 6, 2005, which is just below Morningstar's typical natural-resource category peer's 53% gain. People may be tempted to try to get in now, thinking that energy stocks may still be on the rise. But Vanguard pointed out that even the S&P 500 Index fund has nearly 9% of its assets devoted to energy stocks, and for most people, that is sufficient.
Louisiana Bond Funds Hold Against the Storm
While it's little consolation given the widespread damage caused by Hurricane Katrina, the mutual funds that focus on Louisiana municipal bonds have held up quite well despite all the damage. For example, Eaton Vance Louisiana Municipals (ETLAX) has lost just 0.12% in the past two weeks. Franklin Louisiana Tax-Free Income (FKLAX) did a little worse, losing 0.51%, but that's still a very modest loss. Overall, while Louisiana funds fared worse than the typical single-state municipal-bond fund's 0.29% return, they have not done as poorly as one might think.
It helps that they are broadly diversified across issues. For example, the four funds that Morningstar tracks dedicated to Louisiana hold on average 42 different bonds. Thus, a hit to any single bond will have a muted impact on the overall portfolio. Moreover, many of the bonds that these funds invest in are insured. That means if the bond issuer is unable to pay the dividends, an insurer will.
T. Rowe's Boesel to Retire in 2006
T. Rowe Price Capital Appreciation's (PRWCX) Steve Boesel will retire "on or about" June 30, 2006, and will be replaced by two analysts, Jeffrey Arricale and David Giroux, who haven't run funds before (with the exception of small slivers of Capital Opportunity (PRCOX), T. Rowe's analyst-driven fund). In recent years, Boesel has put up solid results at his charge, and investors have answered by quadrupling the fund's size since he took the helm in September 2001. Boesel is a T. Rowe veteran and will be sorely missed.
High-Yield Manager Leaves Columbia
Columbia Management, recovering from settlements from past charges of market-timing and late trading, is now facing another inconvenience: the loss of an experienced fixed-income manager. Jeff Rippey, comanager of several bond funds at Columbia, including CMG High Yield Bond (COHYX), Columbia High Yield (CMHYX), and Columbia Fixed Income Securities (CFIAX), is leaving later this month for undisclosed reasons.
Rippey enjoyed a degree of long-term success at the inexpensive CMG High Yield and also at Columbia High Yield, though both funds have struggled in recent years. The other comanager of Columbia High Yield, Kurt Havnaer, will take over management duties for the fund. Although we are fairly confident that Havnaer would not have been reinstated had he committed the alleged offenses, his experience running the fund is fairly limited--only since May 2004--and only time will tell if he will have the same success as Rippey. Columbia Management has not named anyone yet to take Rippey's job of managing CMG High Yield yet. Investors should pay careful attention to who ultimately runs the show. Rippey only managed a small portion of the Fixed Income Securities fund, and the offering still has an experienced management team led by Leonard Aplet. Thus, we do not expect to see dramatic shifts in that portfolio.
Spitzer Gets a Taste of His Own Medicine
J. & W. Seligman & Co. Tuesday fought back against New York Attorney General Eliot Spitzer by filing a lawsuit charging Spitzer overstepped his authority in investigating market-timing at the firm. Seligman says Spitzer's expanded investigation into fees takes him into territory clearly marked for the SEC.
In early 2004, Seligman disclosed that an internal review in late 2003 had revealed four market-timing agreements in the preceding three years. Later that year, the shop disclosed that the board had directed it to reimburse four funds a total of $2 million to make up for any harm done to shareholders; simultaneously, the shop announced that the SEC, NASD, and Spitzer were investigating.
Seligman says it had reached a tentative settlement with the SEC and Spitzer in mid-August, but then Spitzer went one step further than Seligman was willing to go. The lawsuit contends that in addition to a financial settlement, Spitzer wished Seligman's board to turn over the negotiation of advisory fees to an outsider and sought access to six years' worth of documentation about those historical dealings.
Dieter Bardy does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.