Skip to Content
Fund Times

Fund Times: Openings, Closings, and Manager Changes

Janus, Fidelity, Putnam, Pioneer, Seligman, Barclays, MAS, and AMIDEX.

Mentioned: , , , , , , , , ,

Some fund-family behemoths laid plans to launch new value funds on the heels of the best year in the last three for offerings that prefer stocks from the clearance racks, while a fallen hero of value investors decided to start his own hedge fund.

Only time will tell whether it's a sign that some of the best minds in the investment business think the bloom has come off the growth-investing rose or, on the other hand, a signal that last year's value rally, modest though it was, has peaked. But three of the biggest names in the mutual-fund business, Fidelity, Putnam, and Janus, have filed papers with the Securities and Exchange Commission to roll out new value funds this spring that they will sell through financial planners, advisors, and retirement plans.

Fidelity Investments, the Boston-based 800-pound gorilla of the industry, plans to create Fidelity Advisor Equity Value and put Fidelity Equity Income II (FEQTX) manager Stephen DuFour in charge. Putnam Investments will launch Putnam Mid Cap Value, and Denver-based Janus Capital, better known for its stable of technology-fueled growth funds, plans to turn out Janus Advisor Global Value for investors. 

DuFour, who has amassed a respectable record running Equity Income II for the last year and Fidelity Balanced (FBALX) before that, is likely to stick to his relative-value investing style at the new fund. However, the new fund will not require him to buy dividend-paying stocks like Equity Income II's prospectus does.

Boston-based Putnam's Mid Cap Value Fund will focus on medium-sized companies that look cheap relative to fundamentals like sales, earnings, or book value. Putnam Small Cap Value (PSLAX) manager Ed Shadek and research analyst Tom Hoey will run the new Putnam Mid Cap Value. The new offering fills in perhaps the only gap in Putnam's well-rounded lineup of mutual funds.

Janus' Jason Yee, a relatively unknown analyst, will run Advisor Global Value and another version of the same fund for institutions and 401(k) plans. He'll look for stocks of all sizes, from all over the globe, that look cheap when compared with their free cash flow, which is often defined as the money a company has left over after it pays for its operations and capital expenditures. Yee also will look for firms that are improving returns on invested capital or undergoing some sort of special situation like a management change. 

Fidelity Advisor Equity Value will charge front- or back-end loads, depending on the share class, while Janus Advisor Global Value will carry a 12b-1 fee to cover distribution. Like all Putnam funds, Mid Cap Value will carry a sales charge. 

Last year the average value fund gained 9.8% while the average growth fund lost nearly 9%. Fund companies have been known to rush to introduce funds in the latest, hottest style or category, sometimes just in time for that area to cool off. Does anyone remember the dozens of Internet funds that hit the market after 1999's Net-stock mania? In this case, the fund families say they are rounding out their lineups. This is actually the second value fund Janus has introduced in a year. Last February, the firm launched Janus Strategic Value (JSVAX) just weeks before growth and tech stocks tanked and value issues started to rise.

Investor awareness of the impact of taxes on mutual-fund returns is growing and so is the menu of offerings that purport to be tax-aware, tax-sensitive, or tax-efficient. The latest entry is the Seligman Tax Aware Fund. J.&W. Seligman & Co.'s proposed tax-conscious fund has a twist though, according filings with the SEC. After it gathers about $1 billion in assets, the fund's management fee will range from 0.5% to 1.5%, depending on how well its after-tax returns compare to the pretax returns of its benchmark--the Russell 1000 Growth Index. The idea is to give the management team, which will be headed by former Nicholas-Applegate Capital Management managers Ben-Ami Gradwohl and David Guy, incentive to reduce the tax bite for shareholders without compromising returns. The fund will use a computer-powered quantitative process to pick stocks, and have back- or front-end loads ranging from 1% for to 4.75% of assets, depending on the share class. Expense ratios could range from 1.77% of assets for A shares to 2.5% for the other share classes.

Seeking to take advantage of the assets and reach of its new Italian owner, Unicredito Italiano, Pioneer Investment Management has launched four international- and global-stock funds. The new funds, which have been available for more than a month, are Pioneer Europe Select Fund, Pioneer Global Financials Fund, Pioneer Global Health Care Fund, and Pioneer Global Telecoms Fund. The Europe Select Fund is based on a similar concentrated fund for offshore investors managed by Unicredito's Dublin, Ireland-based investment management unit that the Italian firm combined with Pioneer after it bought the fund family last year. Management teams for all the new funds work out of Dublin and Boston.

Just as high-yield bonds bounce back from an abysmal 2000, Barclays Global Investors has introduced an index fund for institutional investors tracking that market. The BGI US High Yield Bond Index fund will follow the Morgan Stanley High Yield Core Investable Index, which offers exposure to about 200 of the most liquid issues in the market. As of right now, Barclays has no plans to offer a version of the fund for individual investors. 

Nearly a year after Harris Associates gave up on recalcitrant value partisan Robert Sanborn, he is giving up on mutual funds. The once-lauded manager of Oakmark Fund  (OAKMX) says he has not lacked offers to manage another open-ended fund, but he's going to launch a hedge fund this spring instead. Oakmark Fund had been seriously lagging its peers when Harris relieved Sanborn of his duties last March. The manager, who many considered one of the smartest, most erudite fund jockeys around, also endured criticism for spurning tech stocks and clinging to then-miserable issues like Mattel (MAT) and Philip Morris (MO). The market has since vindicated Sanborn some, as Mattel and Philip Morris have soared since Harris sacked him. That may renew interest in his deep-value style, but the interested better be well-heeled, too. Sanborn's fund will require a minimum investment of $5 million. 

A new hedgelike, closed-end fund from AIM Capital Management is more within the reach of the average investor, though not by much. AIM's Millennium Alternative Strategies Fund can engage in a wide range of exotic investing techniques, including using short-selling and leveraging. It also can dabble in foreign currencies and private equity. But investors must already have substantial assets in AIM accounts and $25,000 on hand to meet the minimum investment. AIM's sister fund family under the Amvescap (AVZ) umbrella will run the private equity portion of the new fund, while the team that runs AIM's young line of Opportunities funds will manage the rest. The three hedge-fund-like Opportunities funds have attracted nearly $2 billion in assets since AIM started rolling them out in 1998. They all posted double-digit returns in last year's rough market, but are now all closed to new investments. Like most hedge funds, Millennium Alternative Strategies will not come cheap; the fund will have an expense ratio of 1.75% and collect 15% of gains of the publicly traded portion of the portfolio each quarter. 

TransNations Investments, the home of the Amidex35 index fund of publicly traded Israeli companies and the Amidex Israel Technology Fund that opened this month, has filed papers to offer a Cancer Innovations Index Fund to investors later this year. The new fund will be the fourth Amidex fund and will focus on biotechnology, drug, and medical-device makers whose products, services, or research aid in cancer detection and treatment according to filings with the SEC. The index will consist of 50 companies ranging in market capitalization from $50 million to $300 billion. The filing does not name the constituents of the index but says it will include 15 pharmaceutical companies, 20 biotechnology companies, and 15 medical-equipment firms. Boaz Rahav, the former Israeli economist who manages the other Amidex funds, will run the Cancer Innovations fund. 

Manager Changes
Tom Marsico, manager of Marsico Focus (MFOCX) and Marsico Growth & Income (MGRIX), has picked up more subadvisory work. According to documents filed with the SEC, the board of trustees for the Diversified Investors Equity Growth Fund  (DVEGX) has sent one of its previous subadvisors, Atlanta-based Montag & Caldwell, packing and hired Marsico Capital Management of Denver and Ark Asset Management of Baltimore. Marsico and Ark join Dresdner RCM Global Investors on the Diversified Investors Equity Growth team. The fund fell in the bottom half of the large-growth category during the one-year tenure of Montag & Caldwell's Ronald Canakaris. 

Arden Armstrong, lead manager of the MAS Mid Cap Growth (MPEGX) also has taken on more work. Armstrong, who has helped guide Mid Cap Growth to category-topping returns, last month took over the reins of MSDW Developing Growth Securities Trust  (DGRBX). Armstrong will continue to work on Mid Cap Growth and MAS Small Cap Growth (MSCGX), where she has two comanagers. 

The institutional team of Miller Anderson & Sherrerd and its parent company, Morgan Stanley Dean Witter, will take over MSDW High Yield Securities  (HYLAX). Steven Esser, lead manager of MAS High-Yield Fund (MPHYX), will lead the new junk-bond squad. Under his watch, MAS High Yield's annualized 10-year returns have beaten 94% of its peers. The new managers replace Peter Avelar, whose penchant for high-income-generating but risky bonds have kept MSDW High Yield Securities at the bottom of its category in recent years, said Morningstar fund analyst Alan Papier. 

Fidelity also shifted the management of one of its high-yield bond funds. It replaced Fidelity Advisor High Income  (FHITX) manager David Glancy with Matthew Conti, who currently works on the high-yield portions of five stock-and-bond hybrid funds for Fidelity. Glancy will continue to manage the new Fidelity Leveraged Company Stock (FLVCX) and Fidelity Advisor Leveraged Company Stock (FLSTX), as well as Fidelity Capital & Income (FAGIX)

Pioneer Investment Management added former Brown Brothers Harriman & Co. bond managers David Eurkus, a 30-year industry veteran, to the team running its Pioneer Tax-Free Income Fund  (MOMTX) and municipal-bond separate accounts. Eurkus joins Ken Taubes, Margaret Patel, Tim Pynchon, Richard Schlanger, Salvatore Pramas, Joanne Fisher, and Andrew Feltus.

Fidelity has slapped a redemption fee on Fidelity Mid-Cap Stock Fund  (FMCSX), one of its top sellers. After March 14, Fidelity will charge shareholders who sell their shares within 30 days of buying them 0.75% of their balance. The question is, will a $75 redemption fee on a $10,000 investment be enough of a deterrent? Fidelity has charged a redemption fee of as much as 3% of assets on other funds to combat short-term trading, but the SEC objected, saying investors should be able cash out of a fund at or near the offering's net asset value.

Read Morningstar's full Analyst Reports on all of the funds mentioned in this article free for 30 days.

Dan Culloton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.