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Market Update

Top 10 Fund Stories of the First Quarter

A roundup of top fund industry developments.

Janus Chooses New Manager for Flagship Fund | 01-24-06 | Dan McNeela
Janus announced on Jan. 24 that David Corkins would be taking over management of the struggling  Janus Fund (JANSX). That fund's former manager, Blaine Rollins, is moving to the much smaller Janus Triton (JATTX), which focuses on small- and mid-cap growth stocks. We think Janus Fund investors have reason to cheer the move. Click for more.

Fund Closings | Morningstar Analysts
Several funds closed to investors during the quarter. Rainier Investment Management announced it will close  Rainier Small/Mid Cap Equity (RIMSX) to new investors, effective March 31, 2006.  Leuthold Core Investment (LCORX) and Leuthold Select Industries (LSLTX) will close on March 31, 2006, to current shareholders and new investors. Masters' Funds said its  Masters' Select Smaller Companies (MSSFX) is "temporarily" closing to new investors in order to slow the rate of assets going into the fund, and  William Blair Small Cap Growth (WBSIX) will close to new investors on May 1. Oppenheimer Funds planned to close  Oppenheimer Developing Markets (ODMAX) on March 6, 2006, to new omnibus accounts, such as 401(k) plans and brokers who do not have existing accounts with the fund. Also,  Oppenheimer International Small Company (OSMAX) was scheduled to close at the same time in the same manner.  Third Avenue Small-Cap Value (TASCX) closed to new investors on Feb. 28. Fidelity Investments closed  Fidelity Japan Smaller Companies (FJSCX) to new accounts as of the close of business on Feb. 28. Analyst Pick  Schneider Small Cap Value (SCMVX), which reopened to investors on Jan. 17, has again closed to new investors. Vanguard closed  Vanguard Explorer (VEXPX) and  Vanguard Precious Metals and Mining (VGPMX) to new investors.  Royce Premier Fund (RYPRX) closed to new investors on Jan. 10.

American Funds Shuffles Managers | 03-07-06 | Paul Herbert, CFA
As a part of a broad plan to split its investment staff into two identical research organizations, the fund boards of  American Funds American Balanced (ABALX),  American Funds Investment Company of America (AIVSX), and  American Funds Fundamental Investors (ANCFX) each approved changes to their manager lineups recently. The idea behind the division is to spread out decision-making responsibilities among more people so that the growing firm can mitigate the frictional costs of buying and selling larger blocks of shares. Click for more.

TIAA-CREF Fee Hike | 03-02-06 | Christopher Davis
In July 2005, TIAA-CREF asked shareholders of its actively managed institutional funds to approve plans to more than quadruple management fees. Shareholders voted against the hikes in all but a handful of instances, but then TIAA-CREF took the rare step of scheduling another vote. It got its way in the January 2006 revote, with shareholders approving the fee hikes. While we once regarded TIAA-CREF's culture as one of the fund industry's best, that's no longer the case. Click for more.

Merrill and BlackRock to Merge | 02-16-06 | Dieter Owen Bardy
We reported on Feb. 14, 2006, that  Merrill Lynch (MER) was in talks with  BlackRock (BLK) to exchange its asset management business for a 49% stake in BlackRock, and recent developments indicate that this deal is projected to close in September 2006. This merger will create an industry giant with combined assets under management of about $1 trillion. Click for more.

Deutsche/Scudder Nears Deal with Regulators | 01-30-06 | Greg Carlson
Deutsche Asset Management, the advisor to the Scudder Funds (which was renamed DWS Funds on Feb. 6), issued a shareholder proxy addressing a raft of issues. Most prominent among them is an expected $134 million settlement with regulators over market-timing arrangements in its funds--only one of which was previously disclosed. While we're glad to see the firm is settling with regulators--it has been two years since the Deutsche timing deal was disclosed--we are disappointed that it didn't notify shareholders about the other deals when they were discovered. Click for more.

Justice Department Faces off with Gabelli | 03-10-06 | Dieter Owen Bardy
As reported by The Wall Street Journal, the U.S. Justice Department is joining a lawsuit against Mario Gabelli. The lawsuit claims that Gabelli, portfolio manager of six distinct retail mutual funds and CEO of Gabelli Asset Management Company, created "sham" companies to bid on FCC cellphone licenses between 1995 and 2000, under rules favoring small and minority-run businesses. Allegedly, Gabelli then resold the licenses for a profit. Click for more.

Managers Eat Their Own Cooking | Morningstar Analysts
In new filings, Vanguard revealed that six more managers, including the Primecap team and David Fassnacht, have more than $1 million invested in their funds. Click for more. In addition,   Vanguard Wellington's (VWELX) John Keogh, who will take over the fund's bond sleeve when Paul Kaplan retires at the end of June, holds more than $1 million in the fund. A filing from Fidelity revealed that  Fidelity Contrafund (FCNTX) manager Will Danoff has more than $1 million of his own money invested in the fund. In addition, Oakmark has revealed that all of its managers have more than $1 million invested in the funds they manage.

T. Rowe Manager Brian Rogers to Lead Firm | 03-16-06 | Lawrence Jones
T. Rowe Price announced that  T. Rowe Price Equity-Income (PRFDX) manager Brian Rogers will replace George Roche as chairman when Roche retires in late 2006. However, Rogers will also continue in his roles as chief investment officer, and manager of the hugely successful large-value offering, which he has run since 1985. Click for more.

Baron Funds Loses President, Portfolio Manager | 03-07-06 | Russel Kinnel
Baron Funds announced that manager Mitch Rubin and firm president Morty Schaja are leaving to set up a hedge-fund business. Rubin had been running  Baron Fifth Avenue Growth (BFTHX) and  Baron iOpportunity (BIOPX). Fifth Avenue Growth will now be managed by Ron Baron, Cliff Greenberg, and Andrew Peck. iOpportunity will be run by Mike Lippert. Click for more.