Fund Times: Vanguard Funds to Lose Longtime Manager
Plus, PBHG still seeking a home, ICM sale, new Kinetics fund, and more.
On June 30, 2006, Paul Kaplan will retire from Wellington Management Company and as portfolio manager of Vanguard GNMA (VFIIX), Vanguard Wellington (VWELX), and the Balanced Portfolio of the Vanguard Variable Insurance Fund. Effective immediately, Thomas Pappas assumes comanager responsibilities for the GNMA fund. John Keogh has joined Kaplan as comanager for the fixed-income portions of the Wellington fund and the Balanced Portfolio.
Losing Kaplan, one of the mutual fund world's top fixed-income managers, hurts these funds, but there is a silver lining. Keogh has worked in investment management since 1979 and has been with Wellington since 1983. He has a less visible track record--he only joined the team that manages Hartford Advisors in 2004--but his level of experience gives us some comfort. Pappas on the other hand, has been with Wellington since 1987, contributing to the GNMA fund since 1994. Additionally, Pappas has managed Target Mortgage Backed Securities (TGMBX) since 1993 and has a respectable record there.
Another Refco Casualty
Old Mutual Asset Management (OMAM), a subsidiary of the South African-based financial services company Old Mutual, decided to withdraw plans to acquire the New York-based investment management firm Forstmann Leff. Forstmann Leff is held by Refco Group Holdings, a wholly owned company of Phillip Bennett, separate from Refco Inc., the financial-services conglomerate that recently filed for bankruptcy protection.
This news matters to investors in the PBHG funds, because these funds' board of trustees had previously approved Forstmann Leff as a subadvisor to some of the funds currently run by Liberty Ridge Capital, a subsidiary of OMAM. Because OMAM decided that it will no longer acquire Forstmann Leff, the PBHG board decided to further shop around the fund's advisory contract.
It's worth reminding readers that a fund board's responsibility is to fund shareholders, and not to the fund's advisor or its parent. The board's decision to hire a new advisor should not be contingent on Old Mutual's ability to close an acquisition deal. But the bigger issue is that PBHG shareholders are still in search of a permanent manager. It's looking more likely that the board will hire subadvisors for the funds now, which could end up being a win for PBHG fund owners in the end.
Warren Isabelle's Firm Being Sold
Ironwood Capital Management, advisor to Warren Isabelle's ICM/Isabelle Small Cap Value (IZZYX), is being sold to MB Investment Partners, a New York-based wealth-management and private-equity firm.
The fund has been a consistent laggard since Isabelle launched it after leaving Pioneer in 1998. Isabelle's attempts to rescue it from the small-value category's bottom half--which included a temporary move to diversify the fund by adding 30 additional holdings, a suggestion from the firm's marketing personnel--have been unsuccessful.
RS Partners Fund to Sock Investors with Big Distribution
RS Investments posted preliminary estimates on how much its funds will distribute in capital gains on Dec. 9, 2005, and some big distributions are in store for many of its shareholders. Small-blend RS Partners (RSPFX) has enjoyed a tremendous run, and its estimated capital-gains distribution amounts to 15% of the fund's NAV as of Nov. 2, 2005. For details on the rest of the funds click here.
Royce Funds also has released its estimates for capital gains distributions.
SunAmerica Still Short a Skipper
SunAmerica manager Brian Clifford has left his post and the firm is having trouble finding a permanent replacement. SunAmerica Asset Management's chief investment officer, Tim Pettee, is managing Clifford's two former funds-- SunAmerica New Century (SEGAX) and SunAmerica Growth Opportunities (SGWAX)--on an interim basis.
This situation is not completely unheard of, however. Several fund firms have found themselves in similar circumstances. For example, TIAA-CREF Growth & Income (TIGIX) was essentially run on autopilot for a whole year while a manager search took place. SunAmerica's predicament bolsters our argument that investors would be better off elsewhere.
New Kinetics Market Opportunities Fund
Kinetics is diversifying its seven-fund lineup with the introduction of Kinetics Market Opportunities Fund. This fund will invest "primarily in the equity securities of U.S. and foreign companies engaged in capital markets or related to capital markets or in the gaming industry." We think most investors can do without such a fund. Murray Stahl and Peter Doyle will manage the fund, in addition to the seven other offerings that they manage. Moreover, the fund will carry a 2.50% expense ratio, which is reason enough to avoid it. Its typical no-load moderate-allocation category peer charges only 1.05%. While the release of this fund was too late to make our list of the scariest funds of 2005, it very well could have been featured among those other frightening offerings--in addition to the new fund's exorbitant fee levy, Kinetics is headquartered in Sleepy Hollow, New York.
Dieter Bardy does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.