Top 10 Fund Stories of 4Q
A roundup of top fund industry developments.
Davis Wins Race to Run Clipper Fund | 11-30-05 | Kunal Kapoor
In what can only be labeled as a watershed event for the fund industry, the board of Clipper Fund (CFIMX) has chosen New York-based Davis Selected Advisers to run the Clipper Fund. Davis will begin running the fund on Jan. 1, 2006, replacing Clipper Fund's departing managers.
We're pleasantly surprised at the board's decision. Click for more.
Magellan Manager Stansky Retires, Lange Takes the Helm | Oct. 31, 2005 | Russel Kinnel
Fidelity announced Monday that Fidelity Magellan (FMAGX) manager Robert E. Stansky is retiring. He will be replaced by Fidelity Capital Appreciation (FDCAX) manager Harry Lange.
Stansky has put up disappointing returns in recent years, as Magellan has consistently lagged its peers. Lange has built an outstanding record at Capital Appreciation, with timely moves in and out of tech among other things. Click for more.
Vanguard Funds to Lose Longtime Manager | Nov. 3, 2005 | Dieter Bardy
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. Click for more.
El-Erian Departure a Jolt to PIMCO | Oct. 15, 2005 | Russel Kinnel
PIMCO is losing one of its top portfolio managers. The firm announced Friday that Mohamed El-Erian is leaving the firm to run Harvard's endowment fund. El-Erian will remain at PIMCO for a transition period of three to six months.
El-Erian built an outstanding record at PIMCO Emerging Markets Bond (PAEMX), which is a Morningstar Fund Analyst Pick. El-Erian was probably the most influential player in emerging-markets debt, as he manages a portfolio of more than $28 billion ($3 billion of which is in the fund).
El-Erian was assisted by a big team at PIMCO, but it's still a blow to the fund. Click for more.
Fidelity Takes Aim at Vanguard's Admiral | Oct. 18, 2005 | Russel Kinnel
Fidelity rolled out on Monday a new share class for its index funds with even lower fees than its standard index funds'. The Advantage class requires a $100,000 minimum investment and it charges just 0.07% in expenses. The firm had previously slashed fees on many of its index funds' retail share classes, which carry $10,000 minimum investments, to just 0.10%.
The Advantage share classes are available for the 500 Index Fund, U.S. Equity Index Fund, Total Market Index Fund, Extended Market Index Fund, and International Index Fund. Fidelity says it will notify investors who are currently eligible to switch to the cheaper share class and will automatically convert them to the new share class.
The move is clearly aimed at Vanguard's Admiral share class, which charges 0.09% for Vanguard 500. Click for more.
Janus Ties Fees with Results | Sept. 30, 2005 | Dieter Bardy
Janus recently filed plans with the SEC to add performance-based fees to several of its funds, pending shareholder approval. Among those funds that will be affected are Janus Contrarian (JSVAX), Janus Mercury (JAMRX), Janus Mid Cap Value Investor (JMCVX), Janus Research Fund (JARFX), Janus Risk Managed Stock (JRMSX), and Janus Worldwide (JAWWX), as well as the advisor-sold versions of some of those funds.
Performance-based fees fluctuate based on the performance of the fund versus its benchmark. If the fund beats its preselected benchmark, then the fund's fee increases and the advisor gets paid more. If the fund lags its benchmark, then the advisor lowers its management fee. At Morningstar, we're fans of performance fees. Click for more.
Changes at Oakmark | Sept. 30, 2005 | Dieter Bardy
Michael Welsh is retiring from Harris Associates in January 2006 and is stepping down immediately from his comanager positions on Oakmark International (OAKIX) and Oakmark Global (OAKGX). Welsh has no specific job plans at this point in time. While a loss, his departure is not a deathblow to Oakmark International, because it has always been clear that David Herro is the lead manager there. And overall, the international team at Oakmark remains experienced and sizable, and it is still growing.
Welsh's departure from Global is more worrisome. Click for more.
The Seligman Saga Continues | Sept. 30, 2005 | Dieter Bardy
The ongoing clash between J. & W. Seligman and regulatory authorities took another turn on Sept. 28, 2005. In a filing, New York Attorney General Eliot Spitzer suggested improper trading at J. & W. Seligman was far more reaching than the firm has reported.
In his press release, the attorney general says he's providing evidence that timing deals were "authorized by top executives" and that although the firm admitted some timing deals, "the full extent of the problem at Seligman has not been disclosed to investors." Click for more.
Fund Firms Win Battles with Corporate Management | Nov. 17, 2005 | Dieter Bardy
Harris Associates, manager of Oakmark Funds, and Southeastern Asst Management of Longleaf Partners Fund (LLPFX) fame, won a big victory when they joined a group of shareholders that succeeded in persuading newspaper-publishing company Knight Ridder (KRI) to investigate strategic alternatives, including a possible sale of the firm. Harris has maintained that Knight Ridder's management has done a poor job for shareholders. Harris-managed Oakmark Select (OAKLX) dedicates 2.68% of its assets to the stock, which represents about $260 million of the fund's total net assets.
Longleaf Buys Dell and Bud | Nov. 15, 2005 | Russel Kinnel
Longleaf Partners' funds revealed that they have found plenty of new names to buy during the third quarter. This is big news because Longleaf is very picky about finding good companies at big discounts. They will let cash grow when they can't find anything meeting their criteria.
By purchasing stocks like Dell (DELL) and Anheuser Busch (BUD)for Longleaf Partners Fund (LLPFX), Longleaf has pared cash from more than 30% of assets in its three funds to less than 10%. "We bought five new companies across the three Funds during the quarter, and since the start of 2005, the total is ten," Mason Hawkins and Staley Cates wrote in the quarterly report. Click for more.