Veteran Manager Stepping Down From Vanguard Explorer
Also, Bill Miller draws up plans for a go-anywhere income fund, Ken Feinberg is leaving Davis Funds at the end of the year, Perritt Capital plans a new fund, and a goodbye to Abe Briloff.
John J. "Jack" Granahan, a longtime manager of a portfolio sleeve of Vanguard Explorer (VEXPX), is stepping back from investment duties at the end of 2013. Granahan, 77, will stay on as chairman of Granahan Investment Management, a firm he co-founded in 1985. Earlier in his career, Granahan worked at Wellington Management Company where he managed the Explorer fund from 1970 to 1979. While at Wellington, he also managed Vanguard Morgan Growth when it first launched in 1968.
Vanguard initially hired Granahan's firm to subadvise Vanguard Explorer II in 1985, and retained the firm to manage a sleeve of the Explorer fund when it merged with Explorer II in 1990. The firm now manages roughly one fourth of the Explorer fund's $12 billion in assets alongside six other subadvisors.
A seasoned investment team remains in place at Granahan Investment Management. The firm's chief investment officer, Gary Hatton, has served as a comanager of the Explorer fund since 1998. The firm's chief executive officer, Jane White, has served as a comanager since 2000. Hatton and White--who co-founded the firm alongside Jack Granahan--have the support of a team of five portfolio managers and analysts.
Legg Mason's Bill Miller Drafts Plans for Go-Anywhere Income Fund
Legg Mason and Bill Miller have filed to launch Miller Income Opportunity Trust. The fund will be comanaged by Miller--who posted a streak of chart-topping results at Legg Mason Capital Management Value Trust (LMVTX) followed by disastrous losses in the late 2000s--and his son Bill Miller IV. The fund has the freedom to invest globally and across asset classes in order to deliver a high level of current income. Its investment universe includes global stocks and bonds, master limited partnerships, private mortgage-related securities, closed-end investment companies, and derivatives.
The fund will follow a strategy that Miller has plied in private vehicles since early 2009. However, it does not yet carry a public track record.
The new fund launch follows a recent resurgence in Miller's performance. His other charge, Legg Mason Opportunity Trust (LMOPX), posted top-decile returns in 2012 and 2013, after lagging nearly all mid-value peers in 2008, 2010 and 2011. Miller has a history of buying private placements at Opportunity Trust, though he has de-emphasized smaller, less-liquid fare in recent years--partly to reduce the fund's overall risk profile. Miller Income Opportunity Trust will provide him with a wider menu of investment options.
Ken Feinberg to Leave Davis Funds
Ken Feinberg, longtime comanager of Davis New York Venture (NYVTX), Selected American (SLADX), and Clipper (CFIMX), is leaving Davis Advisors at the end of this year. Danton Goei, who has been with the firm for about 15 years and has managed a big sleeve of Davis Opportunity (RPEAX) for 12 years, will take Feinberg's place on New York Venture, Selected American, and Clipper. Chris Davis, Feinberg's partner and firm CEO and CIO, remains on those large-cap funds and will take over Feinberg's other assignment, Davis Financial (RPFGX), which he comanaged from the fund's inception to 2007 before handing it off to Feinberg, who had been a listed fund manager on Davis Financial since 1997.
The decision to part ways was amicable, but initiated by the firm, and Feinberg has no plans to work anywhere else right now, Davis said. Feinberg could not be reached for comment this week. His withdrawal is a surprise, but Goei's promotion is not. Davis has telegraphed Goei's advancement within the firm for several years, mentioning his contributions in annual reports and giving more authority in analyst-run funds like Davis Opportunity, where he will continue to play a role until other analysts are assigned to the fund. Still, this is a material change that will affect most Davis-advised funds' ratings.
Perritt Capital Plans Small-Cap Fund
Micro-cap specialist Perritt Capital Management is adding a third offering to its small stable of funds, which currently includes Perritt MicroCap Opportunities (PRCGX) and Perritt Ultra MicroCap (PREOX). According a recent SEC filing, Perritt Low Priced Stock is in the works. It will be comanaged by Michael Corbett (who runs the other two funds) and longtime Perritt analyst Brian Gillespie.
Although the name may suggest otherwise, this is not another micro-cap offering. The fund must invest at least 80% of assets in stocks priced at $15 or less at the time of purchase, but has leeway with the remaining 20% of assets. In fact, with a market-cap ceiling of $3 billion at the time of purchase, the fund will have a larger-cap focus than its siblings, though it should remain firmly in the small-cap camp.
Corbett has been incubating a small-cap strategy for several years, partly to provide a home for strong picks that "graduate" out of the micro-cap funds but remain attractive opportunities. The question remains whether the firm will retain a research edge in a space with more competition.
Noted Accounting Professor Abe Briloff Dies at Age 96
Influential accounting professor Abe Briloff, who counted Royce Funds' Charlie Dreifus among both his students and his adherents, died on Dec. 12 at his home in Great Neck, N.Y. He was 96.
Dreifus long has hailed Briloff, who was his professor in graduate school, for his critiques of public companies' accounting. In an interview this month, in fact, Dreifus discussed his investment philosophy, stating that one of the important parts of his analysis is his deep dive into firms' financial statements, which he said others describe as Dreifus' "secret sauce."
"And I always tell people the credit should go to the chef, Abe Briloff, who was my accounting professor in graduate school," Dreifus said. "He's been known over four, five decades as being this super critic of companies but, more importantly, of their accountants who allow them to portray their numbers in an aggressive fashion, which doesn't square with the reality. Abe's contention, basically, is that the auditors should be ombudsmen, and they should insist that companies present the numbers in accordance with the economic reality, rather than some fiction."
For years, Briloff was known in the investment community for articles he penned for Barron's, in which he would highlight companies' poor accounting.
Associate director of fund analysis Dan Culloton, senior fund analysts Greg Carlson and Laura Lallos, and fund analysts Robert Goldsborough and Flynn Murphy contributed to this report.
Morningstar Fund Analysts does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.